ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: When Lower Payments are More Expensive than Higher Ones

Monday, November 3, 2008

When Lower Payments are More Expensive than Higher Ones

When financing a car, the # 1 question to ask is this: Do I need to finance/lease in order to get the car I want or can I pay cash? If the answer is the former and they have a business, then leasing the car through the business is the best value. I copied these #'s from one of my sources for leasing versus buying with a car note with a standard 3k down and financing $16.66 per thousand, as is standard for car financing.

The advantages of a lease include: 1) 100% financing or little to no down payment and 2) Most importantly, maximum tax deductibility. As you can see, the value of the car and interest on it are no deductible under the consumer financing but are under the commercial lease through a business. Financing looks cheaper until you get to tax time and the dollar for dollar expensing of the commercial lease wins out every time.

So if you can't pay cash for the car you want and you have a business, then a lease is the answer. For questions about my calculations, please feel free to email me directly at

Buy w Note
Value of the Car 25000
Down Payment 3000
Buyout Price at End of Term 0
Amt Financed 22000
Months 60
Monthly Payment 416.5


Monthly Rate 0.443%
1.017% Rate on
36 Month
Rate on Car Note 5.31%
12.20% Payment

Tax Deductibility 0
Net Cost 24990

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