How To Lease A Car In Your Business Name [STEP-BY-STEP]

how do you lease a car in the name of your business well there's a correct way to do it and a wrong way what are the steps what about insurance and what about a car you already own but want to move that car and use that car for your business when you lease a car in the name of your business that car becomes a business asset allowing you to deduct the cost associated with the car oh and what costs well you have two options the first method is something called the actual expense method which as the name implies allows you to write off the exact cost of the vehicle so the actual lease payments sales tax any repairs your maintenance costs and even those annoying trips to pet boys are all tax deductible oh and let's not forget about insurance payments now the second option that you have for writing off a leased vehicle is with something called the standard mileage method which simply allows you to write off mileage but no matter which option you choose i want you to know these three things first you can choose only one method to write off a leased vehicle so calculate both methods during tax time to see which one allows you the biggest tax write-off and the second thing is that you can only deduct the portion of expenses or mileage used for your business so if you use the car 20 of the time for your business then you can write off 20 of expenses or mileage during tax time so now you know the benefits of leasing a vehicle let's look at how to actually get the lease for that vehicle step by step and that process is actually pretty simple step number one to leasing a vehicle in your business name is to build your business credit and that's because a business who has established business credit will be able to lease a vehicle in the business name get this without a personal guarantee and on the flip side a business that does not have established business credit will still be able to put the lease in the name of the business but will more than likely have to sign a personal guarantee which simply means that you are personally liable for any defaults on those payments now if you just got discouraged don't be because here's the truth most people will not have enough business credit or even a big enough business to bypass a personal guarantee and if that's you it's completely okay here's a tip i wish i knew when i got started in my business when you go to lease that vehicle simply ask that they do not report on your personal credit unless you default on payments you'd be surprised how often they'll accept that request especially if you have some sort of history with that dealership but how exactly do you build your business credit i made an entire video on this exact subject but for this video here's the quick and to the point version of how to build your business credit step number one is easy and something you likely have already done and step number one is to incorporate the business you see as a sole proprietor or general partnership you don't have separation between you and your business in the eyes of the irs you and your business are one in the same and because of this it's nearly impossible for a sole proprietor or a general partnership to build business credit so step number two is to get an ein and ein acts like the social security number for your business and some businesses require an ein from their vendors in order to pay them for services and don't worry about costs because you can get an ein completely free simply by visiting the irs's website now once you have an ein you're ready for the next step and step number three is to get a business phone number and a business bank account and you will use that business bank account to receive all revenue and to pay all expenses now step number four is to register with done in bradstreet and get yourself a duns number now step number five to build business credit is to establish trade lines specifically with vendors who report to your business credit and trade lines are simply lines of credit where certain vendors and certain suppliers will allow you to buy products today and pay for it at a later time and those payments that you make report on your business credit to get you started here are three very popular and useful trade lines the first is shirtsy which is an online store to buy customized apparel for your business then there's uline which is one of the top sites for packaging materials and supplies and then there's quill which supplies office and cleaning supplies for your business so you have your trade lines now simply pay them on time do this enough and your business credit will grow and to get the highest credit scores pay your trade lines early all right step number two to getting a lease in the name of your business is to go out and get the lease in most cases dealerships will have a specific department that is dedicated to loans and leases for business owners you'll want to talk specifically with that department now before you sign any old lease agreement here's a few important things that you should know about leases first know that there are two types of leases that you can get in an open in lease contract you are responsible for paying any difference between the estimated residual value which is basically the estimated resale value and the actual resale value at the end of the lease in a closed-end lease you are only responsible for paying the extra mileage and damages that are not considered normal wear and tear so if you plan to put a lot of miles on your leased vehicle and open lease may be best for you because the difference in value is often cheaper than paying for extra mileage then there are a few terms that you want to be aware of so you can get the best deal possible like capitalized costs aka cap costs which is the amount you pay to lease a car and when you negotiate make sure that that is a lot lower than the msrp then there's residual value which is the amount the car will be worth at the end of the lease and it's important to know that that residual value is based on a number of factors including what type of car you have and how long the lease actually is because the longer you keep the car the less its residual value will be because the car depreciates over time and speaking of time let's talk about term length term length is simply the number of months you lease the vehicle for shorter term leases tend to be more expensive than longer term leases because the value of the car depreciates the most especially in the first two years with longer leases generally having lower monthly payments but always think about the needs of your business first because breaking a lease early does come with extra penalties then there's something called estimated annual mileage and it's something that you want to know before you sign your lease your estimated mileage will be determined by how often you drive the vehicle per year before you have to come out your pocket to pay for extra mileage if you plan on driving more than the average person which is about 12 000 miles per year then you may want to consider an open in lease and now that you know those terms you can better negotiate your lease to get the best terms for your specific business now what about insurance and registration well when it comes to obtaining insurance for the car if the car will primarily be used for business you will want commercial insurance if the car is mostly used personally and sometimes you use it for the business then you may be able to get away with personal insurance and you will want to register the car in the name of the business every state has different regulations on registering a car in the name of a business so be sure to check with your state on what documents are needed oh and before i forget the question that everyone wants to know how can you turn a personal vehicle into a business vehicle well it's actually quite easier than you think simply create a lease for you and your business and make sure the terms are reasonable and similar to like-kind leases be sure to give this video a like for that youtube algorithm and subscribe to the channel for more videos that help you save on taxes and increase your wealth i'm quran from life accounting and i'll see you in the next video

Channel: LYFE Accounting

Views: 12,551

Keywords: lyfe accounting

Id: e29z4IU4EZo

Length: 11min 49sec (709 seconds)

Published: Tue Aug 09 2022