Leasing, purchase or rental of your company car: what are the pros and cons?

Leasing and financial or operational lease, purchase...

In Belgium, the self-employed and companies that invest in a company car or in a fleet of vehicles have various financing options. Here is what you need to know to make the right choice.

The purchase of your company car

You or your company owns your company car. Financing is often provided via a credit. From an accounting point of view, the company car is included as an asset on your balance sheet, with depreciation over 5 years. The interest on the loan is regarded as an expense and therefore ends up off balance sheet.

Advantages

• Unlike leasing and rental, you do not pay VAT on the interest on your financing.

Disadvantages

• The presence of the investment on the balance sheet reduces your financing ratio.

• You cannot shorten the depreciation period without permission from the administration.

• You pay VAT without the possibility of spreading it over the depreciation period.

Leasing, a lease with a reduced purchase option

As with rentals, financial leasing of a company car is a lease with an option to buy. Here, the amount of this option must be less than 15% of the acquisition value. Leases are recorded on the assets side of the balance sheet, with the exception of interest, which is an expense. Depreciation takes place over a period of 5 years.

Benefits

• You can spread the payment of VAT over the duration of your leasing contract.

• You do not pay VAT on the residual value of your company car.

Disadvantages

• You cannot shorten the depreciation period without permission from the administration.

• You pay VAT on the interest relating to the financing of your car as this applies to the total monthly payment.

• The presence on the balance sheet reduces your financing ratio.

Rental: More flexibility to finance your company car

As with leasing, finance lease is a lease with an option to purchase, in this case more than 15% of the purchase value. Renting is a cost and the investment is therefore not included in your company's balance sheet.

Benefits

• You can shorten the amortization period without having to negotiate with the administration and pay off a first larger monthly payment.

• Your financing ratio remains stable because your investment is not included on the asset side of the balance sheet.

• You can spread the payment of VAT over the duration of the lease.

Disadvantages

• You pay VAT on the interest, as it applies to the total monthly rent payment.

• Did you know that? The calculation of the deductibility of your company car will change in 2020, with in many cases a less favorable result... A shortened depreciation period for a now purchased car may therefore prove to be fiscally interesting. The calculation of the Benefit of All Nature (VAA) remains the same.

Rental and operational leasing: the all-in formula for fleet managers

The operational version of leasing and rental is generally chosen by fleet managers. Operational leasing and rental cover costs and services other than car financing: insurance, maintenance and repairs, taxes... Fleet managers are thus able to budget the costs of their fleet very precisely because the previously determined monthly payment covering all services is fixed.

Advantages

• Simplified management for fleet managers

• Controlled and predictable costs

Disadvantages

• If you don't drive much, this formula can be more expensive.