How to Lease a Car Through Your Business in Canada
In Canada, businesses commonly lease automobiles and trucks rather than purchase them outright. Leasing offers a number of advantages: preservation of existing capital, reduced disposal costs and tax benefits.
In addition, leasing allows businesses the opportunity to replace vehicles every three or four years, and avoid many of the maintenance issues that crop up with increasing mileage or age.
Finally, leasing offers businesses a degree of flexibility in budgeting that is not available with a vehicle purchase.
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Things You'll Need
- A copy of your business registration or Articles of Incorporation, if your business is incorporated
- Financial, bank and cash-flow statements for the last two or three years
- Bank account information if the payments are to be withdrawn from the company's bank account
- Credit references, if the leasing company requires them
- A copy of your driver's license if you are a sole proprietor, or a copy of the corporate license if the lease will be in the corporation's name
- Proof of automobile insurance
Instructions
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Getting Ready to Lease a Car or Truck for your Business
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1
Review the transportation requirements of your business. What kind of car or truck is required? How will it be used? How much mileage will be involved? How much wear and tear?
Identify the type and kind of vehicles that will meet the company's needs. This is easily accomplished by visiting the websites of various car or truck manufacturers.
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2
Visit a few vehicle dealerships that lease the vehicles that are on your short list of candidates. Test-drive the vehicles and review their features. Obtain brochures and make notes of your impressions; these will help you determine which vehicle will best meet the needs of your business.
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3
Make an offer to lease. At this stage, you will need to complete a lease application and supply the documents referred to above. Most dealerships and commercial lease companies have staff members who are trained to assist you in handling the administrative elements of setting up a lease.
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1
Tips & Warnings
Commercial leases are usually based on the financial strength of a company, rather than that of its principals. If you are a sole proprietor, your personal credit rating and income will come into play.
Consult with your accountant to determine the advantages and disadvantages of leasing, as well as the impact it will have on the company's cash flow and tax position.
The finance arms of many auto makers offer vehicle leases. Besides the various financial incentives they offer, their lease rates are often competitive.
If you will operate a fleet of vehicles, it may be advantageous to use a company that specializes in commercial vehicle leasing.
If you decide to lease and return the vehicle at the end of the lease, a buyout equal to the residual value of the vehicle usually applies. Fees for excess wear and tear may also apply, and can be hefty. As a result, it may be less costly to buy the vehicle and then sell it.
From a tax standpoint, leasing is not always the most advantageous way of acquiring a vehicle.
You can reduce your monthly payments by negotiating the capital cost of the vehicle. Note that reducing the capital cost almost always increases the residual or buy-out price at the end of the lease.
Leasing requirements vary from province to province.
References
Resources
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