Leasing in Your Business’s Name

Leasing in Your Business’s Name

In business, there are no "one-size-fits-all" solutions. And at Carlease we understand that every business is unique and their transportation needs are different, which is why we customize leasing solutions to fit your business's needs and growth. But when - and why - should you lease in your business's name?

Leasing in your business’s name is a great way to limit personal liability and build a stable base of credit for your business. And with a reliable and performative fleet management company like Carlease, transportation savings can range anywhere from 10% to 20%.

When considering whether to lease in the business's name, there are a few key factors to take into account:

  • What percentage of the vehicle(s) will be used for business purposes
  • Your business's credit score and credit history
  • And the number of vehicles your business needs

Driving in the Name of Business

It should come as no surprise that, in order to lease a vehicle under your business's name, you will need to use the vehicle for business purposes! The amount of business use on your lease will affect you come tax season too. Let's break it down further:

Why is it important to consider business use when leasing a vehicle?

Because your business can deduct your lease payments to the extent your car was used for business purposes during the year.

Let’s say you secure a great monthly lease payment through Carlease at $375 per month, $4,500 annually.  Let’s also say that you use your vehicle for business purposes 75% percent of the time. You can write off $3,375 in lease payments come tax season ($4,500 * 0.75).

But be careful about making generalizations! If you lease a car deemed a luxury model, you will need to lower your deduction by what’s known as the “lease inclusion amount”. This is the fair market value of a leased asset exceeding a certain threshold, i.e. a more expensive vehicle.

So does it make more sense to purchase a vehicle for my company? Will I get a better deduction?

Not necessarily! When you purchase a vehicle (or property, machinery/equipment, or tech assets) you are taking on a capital expenditure - or major purchase that will be used well into the future. A leased vehicle is an operating, or day-to-day, expenses. There are a few reasons why you may want to purchase a vehicle but a far greater number of reasons why a leased vehicle is more attractive. Let’s talk about why you may want to purchase a vehicle:

  • You’re a well-established organization (7+ years of business) with a great credit score (in the 80s or above)
  • Your business’s debt to income ratio is lower than 40%
  • Your business liquid to the extent that a large down payment isn’t a hindrance to day-to-day operations
  • You have few capital expenses and don’t foresee taking on many more
  • You are looking to purchase a relatively few number of vehicles.

This isn’t the case for many companies though. And even if you can check off a few items on the above list, leasing a vehicle may still be a smarter option.

One of the top reasons we hear our clients choose leasing over purchasing for their business, is that leasing builds credit without tying up valuable capital that could be used for other purchases, investments or daily operations. If you're a start-up, a small-business owner, or self-employed, building up valuable business credit early on is paramount to financial success and your ability to secure additional leases or loans in the future. And not only does a purchase require a substantial upfront capital investment, they often come with monthly payments higher than those of a lease. To read more about deductions on a purchased vehicle, we recommend this article by Fit Small Business.

Credit Requirements for Business Leasing

When it comes to leasing and credit, there is a very simple correlation - the better the credit score, the better (read: smaller) the lease payment. Unlike personal credit scores, business credit scores are often calculated on a scale of 1 - 100. Dun & Bradstreet, a leader in commercial data, analytics, and insights, shared the following:

"Scores are divided into three Risk Categories, with 0 to 49 indicating a high risk of late payment, 50 to 79 indicating a moderate risk, and 80 to 100 indicating a low risk." The lower your business's risk of defaulting is (being unable to pay your bills on time, or at all), the higher the line of credit your business is eligible for and the better loan/lease terms you will be offered. But don't lose hope if your business's score is either lower than you want it, or your credit history isn't established enough to get a loan or a lease. This is where a personal guarantor steps in.

Simply put, a personal guarantor gives his or her word that they will be responsible for any payment(s) that the business is unable to meet. Should the business go under or finances change, the personal guarantor agrees to adopt the monthly payments of the vehicle(s) until the end of the lease. Personal guarantors help you get approved, and can oftentimes lead to a lower lease payment with a strong enough credit rating. Provided that all payments are met by the business in a timely manner, the guarantor is merely a safety net, while the business builds up positive credit for the future.

Thankfully, the business leasing experts at Carlease are well versed in helping you secure the best payment for your business no matter your credit score.

A Fleet of One or One Hundred

The final piece of the puzzle is to determine how many vehicles your business needs. Oftentimes, the more vehicles you lease, the better the terms can be, and the lower the payments on each vehicle. This is called "fleet pricing". Thankfully, Carlease can secure you fleet pricing whether you're in need of one or one hundred vehicles. We work with our dealer partners across all makes and models to offer fleet pricing for our clients. This means that you can build a fleet that's right for you, without worrying about money left on the table.

Finding the Best Deal

You've come to a decision, you're going to lease a car for your business! The first and most costly mistake is going to your local dealership, requesting a car lease quote and accepting the first offer you receive. This often results in business owners paying significantly more than they need too and spending a good portion of their day waiting and waiting and waiting on a rather pushy salesperson. Ultimately, dealerships can only obtain business lease quotes from their manufacturer's finance company, which may not always be the most competitive solution.

In contrast, Carlease deals with several independent finance companies and will shop around the market to help your business find the best business lease promotional deal. We provide a world-class, high-touch customer service experience, which even includes delivery of your new fleet right to your business's door.

Why Carlease

Still not convinced Carlease is the best option? Reach out to our business leasing experts today and find out how easy, fast and painless the leasing process can be.

Our business leasing experts combine extensive research, personal support, and easy vehicle selection help you make an informed decision - all from the comfort of your home or office. When you’ve picked your perfect vehicle(s) and customized lease plan, our agents will take care of the financing and deliver your new lease(s) right to your door, saving you hours of time and aggravation at the dealership and saving your business money.  

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Not sure where to start? Need leasing advice? Our team of leasing advisors are here to help.

847-714-1414 sales@carlease.com