Options for owning a car

This post discusses the different options that you have for owning a car. Here are the usual disclaimers:

  • I’m assuming a single man limited company in Finland
  • I’m assuming that you need to “fully” own a car, so I’m not considering car pools, taxis, and such
  • I’ve done the comparison from my own perspective. Your mileage (pun intended) may vary.

Option 1 – personally owning the car

In this option you own the car personally, so the company is not involved at all. If you drive company trips with your car, you can pay yourself 0,41€ / km (2017) tax free mileage allowance.  Note! If you tend to work in a single place, the tax authorities consider that place as your workplace, and you aren’t eligible for mileage allowance for trips between your home and the workplace.

Option 2 – leasing

In this option, your company makes a leasing deal with a leasing company, and you get to drive a brand new car for a monthly fee. You can fully deduct the fee in your company’s taxes. The downside is that you’re usually commited to the deal for 2 to 3 years. And after the deal is done, the car is gone.

Option 3 – company owns the car

In this option, your company buys the car, either directly with cash or then you make a deal with a finance company. The value of the car goes to your balance sheet (tase), and you can make depreciations (poistot) from its value, 25% each year. Basically this means that if you spend 30000€ to buy a car, your company’s yearly profit isn’t 30000€ less, but 7500€ less. This is important consideration because companies pay taxes based on the profit that they make.

The downside of owning the car is that usually it’s just added risk and a liability. But the plus side is that after you’ve paid for it, your company owns the car, which is not the case if you choose leasing.

Full benefit or not?

If you choose option 2 or 3, you need to add car benefit to your personal taxation. So for example, if you have 4000€ monthly salary and the car’s taxation value is 600€, you pay taxes based on 4600€ monthly income.

You also need to decide whether you choose full benefit or just usage benefit. In the former company pays for everything, including gas. In the latter you need to pay for the gasoline yourself, and if you drive company trips with the car, you can have 0,10€ / km mileage allowance.

Conclusions

The downside of mileage allowances is that you need to have a travel diary for every company trip that you drive. That’s probably the main reason I chose full benefit — I don’t have to worry if a journey is company travel or not. I just drive around and the company pays for everything.

I haven’t made complete financial calculations. But I think if you have multiple customers and you need to drive around a lot, then it’s probably worthwhile to just personally own the car and bill tax free mileage allowances from your company. But if you drive less and usually just to single workplace, then it’s probably wiser for the company to own the car. Choosing between leasing and owning is more a matter of personal taste and preferences.

One additional thing to consider is that if you currently personally own a car, you can sell it privately and then get the new car for the company. Whatever you get for selling the car — that’s your personal money, not company’s.

P.S. Actually I would love to go with Option 4 — not owning a car at all. Unfortunately that’s not an option for me yet. 🙂

 

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