📍 Car
How do you acquire a vehicle for your business: by buying or leasing? Which option is the most cost-effective?
Choosing how to acquire your car
Once you've chosen your car, the big question is how to finance it: buy or lease. This is primarily a financial decision, not a tax one. The method of acquisition or financing has no impact on the deductibility of expenses.
Loan interest is 100% deductible, regardless of the car's deductibility rate.
💡 If you opt for a lease, make sure your monthly invoice clearly distinguishes between financial charges and interest. This only matters if the car's deductibility is not 100%.
1️⃣ Buying
👉🏻 This includes outright purchase with own funds and purchase with financing.
Buying is ideal in these situations:
If you have a long-term vision (5+ years) for your car. This is even more relevant for electric vehicles, which have more durable drivetrains (almost no engine maintenance required, unlike combustion engines which can develop issues after a certain mileage).
If your cash flow is sufficient each month. Even with a bank loan, you'll end up paying 100% of the purchase price spread over a maximum of 60 months.
If you drive more than 20,000 km per year. Lease contracts often cap mileage at 15,000 or 20,000 km.
If you want to buy a second-hand car. There are great deals to be found, but leasing companies are generally not keen on used vehicles, so purchasing is usually the only option.
2️⃣ Leasing / Renting
👉🏻 This includes renting, leasing, and long-term rental.
Leasing is ideal for:
Reducing short-term cash outflows. Each month, you pay a fixed instalment. This amount is calculated on the vehicle's value minus the purchase option. If the purchase option is 20%, you only pay 80% of the car's value over the contract period (usually 60 months).
Reducing hassle. With rental formulas, you can include services such as insurance, tyres, maintenance, and more. No nasty surprises.
Making a capital gain by exercising the purchase option at the end of the contract (since the option value is usually lower than the market value). Note: if the option is exercised by you, your spouse, or your children, you will be taxed on a benefit in kind.
Summary
| 1️⃣ Buying | 2️⃣ Leasing / Renting |
Terminology | Purchase with own funds, purchase with financing, bank loan | Long-term rental, financial renting, operational renting, financial leasing, operational leasing |
Deductibility | Monthly via depreciation (single purchase invoice at the start) | Monthly via 1 invoice, except for leasing (which follows the purchase method) |
Recoverable VAT | On the purchase price. However, VAT must be paid in full at the time of purchase, and only a portion is recovered. | On each monthly instalment, which also includes interest. This means non-recoverable VAT is paid on that interest, unlike with a bank loan. |
Includes services (insurance, maintenance, tyres, road tax, etc.) | - | Optional (referred to as operational renting or leasing, as opposed to financial renting or leasing) |
Ideal for | ✅ Long-term view ✅ Second-hand car ✅ High mileage ✅ Available cash flow | ✅ Lower upfront cash outlay ✅ Less hassle ✅ Private takeover at end of contract
|
Financially | The least expensive overall | The least expensive in the short term |
Advantage | The overall cost | Flexibility |
💡 BILLY's advice
Renting is the option most often recommended by our accounting advisors. You save on your monthly payments over the five years of the contract. At the end, you can exercise the purchase option and become the owner of the car. In a way, you get the best of both worlds, while still having the freedom to switch cars without any hassle when the contract ends. It's a very good compromise.
Leasing / renting is the ideal option in the following situations:
You change your car every 5 years
You're unsure about your car's value in 5 years ("I don't want to take any risk")
You want to drive a higher-end vehicle for a lower monthly payment compared to buying.
On the other hand, buying has the disadvantage of reducing your borrowing capacity, because either you have a loan or you have less cash available. If you're planning a property purchase, for example, this could limit you. Buying remains worth considering if you're not set on driving the latest model with all the newest features, and you don't feel the need to change cars every 5 years at all costs — the overall cost will remain lower.
Finally, leasing is a hybrid solution that can be complex. From an accounting perspective, you are the owner — it's treated like a purchase. From a legal perspective, you are not the owner.
More details on rental options
When you opt for a rental arrangement, you need to distinguish between the three types of car rental financing, as shown in the table below.
| Renting | Leasing | Long-term rental |
Accounting principle | Rental invoice | Investment without ownership, with depreciation | Rental invoice |
Purchase option at end | >= 16% | <16% | No purchase option |
Best choice when | The best compromise | The most complex | The most flexible |
💡 Don't confuse renting with leasing (dealers often mix up the terms).
Here's a simple way to tell them apart — in both cases, you have a purchase option at the end of the period (usually 5 years):
If the option is less than 16% of the car's value: leasing
If the option is 16% or more: renting
You can think of leasing as a hybrid solution between financing (your accounts hold the vehicle as a fixed asset) and renting (you receive a monthly rental invoice with VAT applied and have a purchase option at the end of the contract).
Financial 💰 vs. operational 🛞 rental
Whether you choose leasing or renting, you can opt for an "operational" rental (as opposed to a "financial" one). This means the rental also includes vehicle-related services: insurance, maintenance, tyre replacement, etc. This is referred to as operational renting or operational leasing.
💡 Taking into account car taxation and the rapidly evolving electric vehicle market, we recommend the flexibility of renting — with a purchase option set at 20%.