Arete TOOLS · BUSINESS TAX PLANNING

Buy vs. Lease
Your business vehicle.

Compare financing, tax effects, and resale value to see which option has the lower modeled cost.

All tools & calculators

01 · Your comparison

Comparison period (full years)Both scenarios begin January 1, 2026, and end December 31 of the final year.

Business use (%)This actual-expense model requires more than 50% consistent business use.

Vehicle categoryCheck the manufacturer’s weight rating and tax classification.

02 · Purchase & financing

All-in purchase price ($)

Cash down payment ($)

Loan interest rate (%)

Loan amortization (months)

Expected resale price at comparison end ($)Sale proceeds before paying any remaining loan balance.

Usable Section 179 deduction ($)Business-portion deduction after income and overall purchase limits. Heavy SUV cap: $32,000. Not used for passenger cars in this model.

Bonus depreciation assumptionPassenger 100% bonus assumes eligibility for the IRS safe harbor. Confirm with your advisor.

03 · Lease terms

Vehicle fair market value at lease signing ($)

Monthly lease payment, including sales tax ($)

First month’s rent paid at signingLast month’s rent paid at signing

Refundable security deposit ($)

Upfront license / documentation costs ($)Modeled as prepaid lease costs spread over the lease term.

Lease acquisition / rent-reduction payment ($)

Lease-end disposition / excess-mileage fee ($)Total expected amount required to return the vehicle.

04 · Tax & opportunity cost

Federal marginal income tax rate (%)Used consistently for deductions, business sale gains, and usable losses. State taxes are excluded.

After-tax investment return / discount rate (%)Used to express future costs and tax effects in today’s dollars.

Assumptions & IRS references

2026 acquisition and lease start; whole calendar-year holding periods. Loan payments occur at month-end; lease rent is due at month-start. First/last prepaid rent is included at signing without double counting. The entire vehicle’s cash costs are included, with tax deductions restricted to your business-use percentage. Any remaining loan is paid off when the vehicle is sold.

Uses actual expenses, 5-year GDS with the half-year convention, and a half-year disposition adjustment during years 2–5. Passenger limits and lease inclusion amounts follow Revenue Procedure 2026-15; the final lease year uses the preceding year’s inclusion column. Passenger 100% bonus uses the Revenue Procedure 2019-13 safe-harbor assumption, without Section 179. Other vehicles apply your usable business-portion Section 179 amount before the selected bonus depreciation. The heavy-SUV cap is $32,000 for 2026.

Tax benefits occur at each year-end and are assumed fully usable. Business sale gains and losses use the same entered federal rate; resale is limited to original cost, so gains above original cost are not modeled. The model excludes standard mileage, changes in business use, mid-quarter conventions, state differences, interest limitations, QBI interactions, trade-ins, and differing maintenance, insurance, or operating costs. Enter only an eligible, currently usable Section 179 amount. This comparison does not establish eligibility for a tax deduction.

Primary references: 2026 auto limits & lease inclusion · 2026 Section 179 limits · Passenger automobile safe harbor · IRS vehicle expense guidance

Buy vs. LeaseYour business vehicle.

Buy vs. Lease
Your business vehicle.