If you have the cash, you will come out ahead if you buy the car. However, if you will need to borrow the funds to purchase the car, there are various factors to consider when determining whether to buy or lease.
How large a payment can you afford? If you buy the car, you will likely have a larger monthly loan payment than if you lease the car; however, the loan payments will usually end after 5 years. With a lease, the payments are lower, but as you do not actually own the car, the payments will not end until you no longer want a car to drive, or buy out the lease.
From an income tax perspective, the amount that you can write off (depreciation, interest, lease payments) is restricted, with all amounts based on the vehicle’s cost not exceeding $30,000. For a purchased vehicle, you get a larger write off at the beginning of the ownership period (depreciation), which then decreases as each year passes. The interest on the loan is also deductible. With a lease, the annual deduction is the same each year.
With a lease, you pay GST and PST on the full lease payment, which essentially means you are paying these taxes on the interest portion of your payment. A business can recover the GST (with restrictions); however, the PST is not recoverable.
Lease vs buy? There is no one answer that suits everyone.
