Realtors have to know how to manage their expenses. One of the decisions they will need to make is whether to buy or lease their vehicle.
- Advantages of Leasing A Passenger Vehicle For Realtors
- Advantages of Purchasing A Passenger Vehicle For Realtors
- Purchasing A Pre-Owned Passenger Vehicle
- Income Tax Deductions
- Factors To Consider When Choosing a Passenger Vehicle
- Be Wary What Dealerships Tell You
It is a well-known fact that lease payments are lower than new car loan payments. However, many lease agreements have mileage limitations that may not be conducive to a realtor. End of lease over mileage fees can be quite costly. However, if you can afford to pay cash for a vehicle, you would eliminate any interest fees and may get a better deal for paying cash. Another method for buying a new vehicle without taking out a new car loan is purchasing it with your line of credit, the interest rate would be much lower. The bottom line when it comes to cost will depend on the vehicle you want, the deal that is offered, the interest rate, and how you are paying for it. Every deal is different, and tax advantages vary depending on how much you spend.
Advantages of Leasing A Passenger Vehicle For Realtors
There are many advantages to leasing vehicles when you are a realtor. The first advantage as mentioned above is the monthly payment. The monthly payment on a leased vehicle is typically lower than a new car loan monthly payment. However, if you choose a high mileage lease, this may not fall true. Another great advantage is that you can get a new vehicle every couple of years when leasing.
Advantages of Purchasing A Passenger Vehicle For Realtors
The best-case scenario for a realtor is the ability to purchase a new vehicle outright. We all know that brand new vehicles depreciate the minute you drive them off the lot, however, when you purchase it cash, there are no monthly payments to contend with. Insurance quotes also tend to be cheaper when you purchase a vehicle rather than lease one as there is no third party involved. When you own the vehicle you are free to make any changes that you see fit to the vehicle and you are not bound by a contract. Mileage is not a worry when you are not leasing as long as you maintain your vehicle and have it serviced as recommended by the manufacturer.
Purchasing A Pre-Owned Passenger Vehicle
When realtors are first starting out, they may not be able to afford a brand new vehicle or the lease payments on a new vehicle, so it may be to their advantage to purchase a certified pre-owned vehicle.
Income Tax Deductions
For Purchased Passenger Vehicles
When a realtor purchases a new passenger vehicle, the Income Tax Act allows claims up to $30,000 plus HST. For example, if a realtor purchases a new passenger vehicle for $50,000, they can only claim $30,000 plus HST. Keep in mind there is a cap on what you can claim. A logbook must be kept to determine the mileage used for business use and mileage used for personal use. This will determine the prorated amount for business use.
For Leased Passenger Vehicles
The Income Tax Act has also placed a cap on the amount of the monthly lease payment that can be deducted. There is a specific way to calculate what you are entitled to deduct. Typically purchasing allows for more deductions at the beginning, and leasing allows for more deductions mid-lease.
Factors To Consider When Choosing a Passenger Vehicle
Cost is only one factor to take into consideration when choosing a passenger vehicle for your business. The vehicle should be spacious and comfortable if you are driving clients around for showings. You want your clients to be as relaxed and as comfortable as possible allowing them to make good solid decisions when looking for a new home.
Did you know that green vehicles are permitted to drive in HOV lanes even if there is only one person in the vehicle? Yes, that is correct. Choosing a green vehicle not only helps our environment and saves you money, but it will also save you a lot of travel time. Plug-in vehicles are considered green vehicles and qualify to drive in the HOV lanes. Many people are environmentally conscious. Clients that feel this way may be more apt to hire you to be their agent over an agent that drives a not so environmentally friendly vehicle. There are also government rebates for purchasing green vehicles in Canada.
Economical Passenger Vehicles
Most realtors do a lot of driving. Fortunately, gas prices have been quite low over the last several months, but when they rise again, it can be quite costly. Choosing a vehicle that is spacious, comfortable and fuel-efficient can be quite the task. This may require a lot of research to find the perfect vehicle for your business.
Always choose a practical and professional looking passenger vehicle for your real estate business. When you drive a professional-looking vehicle, it reflects on your professionalism. Never show up to a client’s house with a rusted, dilapidated vehicle, you can almost guarantee you won’t be hired.
Be Wary What Dealerships Tell You
Most dealerships will tell you that leasing is better because it increases their sales. They are looking out for their own best interests, not yours. When leased vehicles are returned at the end of the lease, the dealership will then sell them for a great profit after already collecting lease payments from you that may have pretty much paid for the vehicle. When you purchase a vehicle cash or through a new car loan, it typically means you will be driving the vehicle for a much longer period of time.
At the end of the day, it really comes down to what your priorities are and what you are looking for financially and practically in a vehicle. However, from a financial standpoint, it would make more sense to purchase a quality previously owned vehicle or a new one over leasing one. If you are the type of person that likes to drive a brand new vehicle every 3 or 4 years, then leasing would be your best option. It’s an individual choice.