Buying a car under a corporation may seem easy to you, but that is not the case. You must consider different things before purchasing a vehicle in Canada. This will allow you to enjoy the maximum benefits after buying the car. Before used car shopping in Bellefonte, PA, familiarize yourself with your budget, research options, compare prices, and request a vehicle history report.
The best thing is you don’t have to search for more information on the internet. This guide has everything you need to know about things to consider when buying a car under a corporation.
- Check Whether Your Business Can Afford The Car
The first step before making a purchase should be to see if your corporation has the funds to buy a new car. This is why you should check all the accounts of your corporation. Consider the average price of a business vehicle in Canada.
You should also apply the relevant tax percentage to the price to understand the final quote. Cross-check the final figure with the amount of money your business can spend on new purchases.
- Buy Only Through Your Business
You may think of buying a car for your corporation using your personal account. That will not be a feasible decision because the vehicle will come under personal income. This means you will not be able to benefit from the same tax deductions that apply to cars bought by a corporation.
The best part is that considering this factor will also be helpful after the purchase. This is because companies are allowed to deduct a specific amount of money for their business vehicles and get compensated for money spent on gas, oil changes, and other repairs.
- Check The Car’s Price
Another thing to consider before buying a car under a corporation is its price. This will help you determine the level of tax depreciation you can benefit from. Remember, vehicles for business in Canada are categorized into 10 and 10.1 classes.
If the car is below $36,000 before applying taxes, it will come under the 10 class. Meanwhile, any vehicle above this cost will be class 10.1. Both classes allow you to get a tax depreciation of 30%. However, a maximum limit is applied to the higher class.
The maximum limit for depreciation will be $36,000. This rule has been effective for corporations in Canada since 2023.
- Keep Fuel Prices In Mind
Buying a car under a corporation may seem like a one-time expense, but that is not true. You will have to spend a few dollars monthly or weekly on fuel. Unexpected car repairs should also be considered before making the purchase.
Your business should be equipped to maintain the car and keep up with the changing fuel prices. If your corporation is small, it may not be the best idea to get a car while your budget is tight and your business is expanding slowly.
These are the top things to consider before buying a car under a corporation. If your business can manage the purchasing and maintenance costs, the car can benefit the company. All the benefits will mainly depend on the functions your business has for the vehicle.