“Is it better to buy or lease a vehicle ?”
“Does it effect Fringe Benefit Tax liabilities ?”
When and the amount of GST you can claim and the tax deductible expenses differ depending whether you buy or lease a business vehicle.
GST – If you are GST registered and buy a business vehicle, including buying it on hire purchase, you claim the GST of the purchase price. So if it’s a $57,500 incl gst car you can get a GST refund amount of $7,500 on the next GST return. You don’t claim GST on the hire purchase payments as they are just finance payments. If you were to lease that car and not own it there is no upfront claim for GST but each lease payment would include GST so you claim that amount when the payments are made. So you would only get as much GST back as buying the vehicle once you have paid lease payments equal to what the vehicle was worth. Buying on hire purchase has some short term cash flow advantages. If you own the car when you sell it there is GST to declare on the sale price.
FBT – The value of the benefit is calculated on the value or cost of the car so whether you lease or buy there should be no difference.
Income Tax – When you lease the payment is tax deductible verses if you own it you claim depreciation. So at the straight line depreciation rate of 21% you would claim the full cost of the car spread over five years. If you buy using finance the interest paid is also tax deductible. When it comes to selling the vehicle see # TAXtipNZ # 5 Selling Assets & Trade ins.
Tax aside you should do the math when comparing lease vs buy. If you can get a low finance rate and can buy well that may be a better commercial decision. Currently some banks offer interest free loans for EV’s. Do your homework and check the terms of Leases as they may have conditions regarding charges for extra kms.