Should I Buy or Should I Lease My Next Vehicle?

As a business owner, I have debated this question many times over the years. I have both leased and purchased, and I like to get a new vehicle every 3 or 4 years... whether I really need it or not.

My advice about making this decision is: speak with your accountant.

There are many ways to handle both the usage and the HST (Nova Scotia) you can claim. Factors, such as whether you are a Sole Proprietor or Corporation, will impact this decision.

• Purchased vehicles become assets and part of your net worth.
• Lease payments become expenses which can be written off using the CRA rules.

Lease payments are generally lower than your payments if you buy, which makes them attractive. Buying might have higher payments but you are making payments on an asset that eventually will be paid off, meaning you will be debt free until you require a new vehicle.

Ideally you don't want to take out a loan to pay off a vehicle that is not expected to last at least as long as the term of the loan. Dealerships may offer longer terms for repayment to make you think the cost is reasonable (smaller payments), however after 5-6 years, the warranty is gone and problems start. A vehicle will depreciate if it's an asset, and generally by 30% in the first year.

Leases have mileage limitations so, based on your future use of the vehicle, this must be considered. There are also penalties if you wish to get out of a lease sooner that its term. Sometimes the lease rates are higher than purchase rates.

Here is a calculator from CRA which will help you compare the costs.

Options for Financing Your Small Business Growth

Have you ever been in a situation where your company is in a growth cycle? Notice how the cash flow becomes such a challenge? If you don't have the cash to purchase the goods up front, or cash to make payroll prior to getting the job completed and paid for, what do you do? If you don't do the project, how do you grow. It can be pretty stressful and tough to get through.

There are options out there. I know because I have been in this situation.

What was that? You say the banks turned you down because they wanted security... in cash? If we had the cash, we wouldn't need the bank!

There is nothing wrong with getting the help you need to get some working capital - as long as the funds are used for the purpose you are borrowing them for.

Resources are available through your local branches of CBDC and BDC. Their interest rates might be a tad higher than a bank, however they are the easiest people to deal with on repayment plans, longer amortization periods and, if you need to take a break for a month, they are just a phone call away.

Depending on the relationship, you might also get financing for a single project. Then, when you have been paid for that project, you can pay off the loan; or you can keep making payments and use the extra cash to finance another project.

There are also resources through the federal and provincial governments to assist with employee skills training, and programs to hire Nova Scotians who require work experience (e.g. START, WIPSI, WEI and Skills Online NS. Student employment programs, such as SCEI, are also available.

Here are links to some Province of Nova Scotia financing options:

• http://workplaceinitiatives.novascotia.ca/workplace-eduction/
• http://www.coursepark.com/ns
• http://novascotia.ca/programs/workplace-innovation-productivity-skills-incentive/
• https://novascotia.ca/programs/co-op-education-incentive/

Keep in mind, an updated set of financials is essential when applying for funding. If you need some assistance with updating your records, please get in touch!