It may seem obvious that a business lease car is the best or even the only option when you, as a self-employed entrepreneur, are looking for a lease car. However, in some situations, it may be more advantageous to opt for private leasing. The consideration is similar to the age-old petrol or diesel dilemma. Both have their pros and cons, with a certain tipping point where one becomes more advantageous than the other.
The pros and cons of business leasing
Opting for a business lease contract has the major advantage that the VAT you pay on the lease amount is deductible. This means that you can deduct a considerable amount from the payable pre-tax each quarter. On the other hand, you will pay for the private use of your lease car through bijtelling (addition to taxable income) if you make more than 500 private kilometers annually. An amount you will likely reach quite quickly.
The pros and cons of private leasing
If you choose to lease the car as a private individual, you won’t have to deal with bijtelling. However, since the car is not part of your business, the costs are also not deductible. This applies to both the monthly lease amount and the fuel costs. However, you can assign yourself a mileage allowance of 19 cents per kilometer for business trips. To do this, you need to keep a detailed mileage record, which is a disadvantage compared to business leasing.
So where is the tipping point?
VAT and bijtelling are the key factors that play a role in the choice between business or private leasing. Influencing factors are again the value of the car and the number of kilometers you drive. As a rule of thumb, you can consider business leasing to be attractive when you make a lot of private kilometers. After all, you pay a fixed amount of bijtelling, which, compared to the number of private kilometers, is relatively low when you use the car a lot privately.
However, if you mainly use the car for business purposes, private leasing may be a better idea, as you avoid a relatively high amount of bijtelling and can still make use of a mileage allowance of 19 cents, which you can deduct from your profit.
Want to know more about the differences between private and business short-term leasing? Feel free to contact us by calling 038-7200 880 or sending an email to [email protected].