You can choose to finance a car, van or truck with an instalment loan. This involves receiving the amount required as a lump sum and repaying it in regular fixed payments, e.g., monthly or annually. The term of the loan can vary between one to six years, depending on the amount borrowed, repayment capacity and the useful life of the vehicle. Good to know – you can deduct the filing fees and interest payable as professional expenses.
Another important consideration is that you will have to pre-pay the VAT of a car loan because the loan only covers the vehicle. Although, as a VAT payer, you can later reclaim part of this VAT on your VAT return, we recommend that new entrepreneurs choose a lease formula. This is because in a lease, your VAT payments are spread across the whole lease period.
If you are an entrepreneur and you choose to purchase a business vehicle with a car loan, you immediately become the owner. This means you are responsible for insurance, maintenance, administration and other matters. A commercial vehicle is an investment that depreciates annually, usually over a period of five years.
"}},{"componentType":"sectionTitle","title":"Option 2 for financing a company car: financial leasing"},{"componentType":"paragraph","richBody":{"value":"Are you a company manager or self-employed person wanting to purchase a company vehicle, but without having to spend a large sum of money right away? In that case, a financial lease could be an attractive option. With this form of financing, ING Lease finances the vehicle, while your company leases and depreciates the vehicle as if it owned it. The monthly lease payments are set out in a contract with a pre-set term, usually ranging from three to five years. For the duration of the lease, you will be able to take maximum advantage of possible tax benefits such as VAT deduction and investment allowance.
When the term of the lease contract ends, you will have several options:
As you can see, financial leasing offers flexibility and preservation of liquidity, which is especially advantageous for companies that want to keep their capital free for other investments. This makes it an ideal financing solution for growth-stage companies with mobility needs.
Over the term of the contract, you will bear the costs of maintenance, insurance, the registration fee and annual road tax.
Has your company got sufficient resources of its own? If so, then of course you can buy a commercial vehicle outright. This option is less interesting than it may appear, however. While it is true that purchasing with your own funds means you do not pay interest, you then cannot use this capital to pay wages, other bills or to make investments. This makes borrowing or leasing to spread payments a more attractive option.
"}},{"componentType":"paragraph","title":"What about tax deductibility?","richBody":{"value":"Costs are tax deductible in all four options (greater or lesser deductions depending on whether they are subject to CO2 emission limits or not). Moreover, the financial costs (i.e., the interest associated with the car loan or lease) are fully deductible.
Good to know – in the case of purchasing or leasing a new passenger car, you can never benefit from an investment deduction.
The tax difference is in terms of VAT, which you do not have to pre-finance with leasing (options 2 and 3).
"}},{"componentType":"highlight","title":"Want to know more?","richBody":{"value":"This article is for informative purposes only and the information set out herein may change with time. We therefore recommend that you always reference specific regulations and requirements with the competent authorities for the latest information. Additionally, we advise that you seek professional advice on a case-by-case basis before making any decisions. Please note that ING Belgium SA/NV cannot be held liable for any decision taken on the basis of the information provided.
"}}]}}}