Buy, lease, or finance — what does the corporation actually pay?
Three paths to the same vehicle look different to the bank, and very different to CRA. We layer in CCA, the lease deduction cap, BC GST/PST, and the time value of money so you can see the real after-tax cost of each option — not just the sticker math.
Enter the vehicle price you’re shopping, the loan and lease terms a dealer offered, and how long the corporation plans to keep it. The three cards below recalculate as you type — both nominal cost and after-tax NPV.
Buy (cash)
option ALease
option BFinance
option CBuy / finance
ownedLease
leasedAdvanced — tax, sales tax, NPV, revenue
A lease is just a loan with a forced residual buyout. Solving for the rate that makes the lease payments + residual equal the vehicle’s pre-tax price reveals what the dealer is actually charging.
Detail — what makes up each option’s cost
| Cost component | Buy (cash) | Lease | Finance |
|---|
Annual after-tax cashflow — year by year
Each line shows the corporation’s out-of-pocket cost in that year, net of tax shields and recovered GST. Negative values represent cash inflows (e.g. resale proceeds).
At your contribution margin, this is the top-line revenue your fleet has to generate just to pay for itself, after-tax. A higher number means more pressure on sales.
Each option has trade-offs the spreadsheet won’t show.
Cost is one input. Flexibility, cash preservation, and operational fit usually decide the call.
Buy (cash)
Where it wins
- Lowest nominal cost — no interest or finance charges.
- No payments after acquisition — cleaner ongoing cashflow.
- Full CCA — tax shield on the whole capital cost.
- No restrictions on use, kilometres, modifications, or upfitting.
Where it hurts
- Large upfront capital outlay — can’t be redeployed elsewhere.
- You bear all depreciation and resale risk.
- R&M out-of-pocket after warranty.
- Half-year rule and Class 10.1 cap reduce the tax shield on expensive vehicles.
Lease
Where it wins
- Lower monthly outlay than financing the same vehicle.
- Predictable, fixed costs — easy to budget.
- R&M often covered by warranty for the whole term.
- Easy to upgrade — swap at term end without selling.
- No residual-value risk to you.
Where it hurts
- Highest long-run cost — you fund depreciation + the dealer’s margin.
- CRA caps deductibility on vehicles over the prescribed amount.
- Kilometre limits — overages compound quickly.
- No equity at term end.
- Early termination is painful or impossible.
Finance
Where it wins
- Preserves working capital while building ownership.
- Interest is deductible (capped at $350/month for PVs).
- Full CCA applies as if you bought outright.
- No km caps, no use restrictions.
Where it hurts
- More expensive than cash — you pay interest.
- Payments reduce operating cashflow for the loan term.
- Risk of negative equity if the vehicle depreciates faster than the loan amortizes.
- Same depreciation and R&M risk as buying.
Common questions
What is CCA and how does it affect buy vs finance?
Capital Cost Allowance is the CRA’s tax-depreciation system. When you buy or finance a vehicle, you deduct a percentage of its undepreciated capital cost (UCC) each year. Most passenger vehicles fall into Class 10 (30% declining balance) up to the prescribed amount, or Class 10.1 if they exceed it. Class 10.1 has its own asset class per vehicle and is capped at the prescribed amount plus sales tax — everything you spend above the cap simply doesn’t generate a tax shield.
The half-year rule applied to vehicle acquisitions limits your first-year CCA to 50% of the normal rate. Some short-term accelerated incentives have phased through 2024–2027; confirm what applies in your year.
How much of a lease payment is actually deductible?
CRA caps the deductible portion of passenger-vehicle lease payments. The deductible amount is the lesser of two ceilings:
Per-month cap: the lesser of your actual payment and roughly $1,100/month + GST/PST (gas; same for ZEVs in recent years). This is the binding constraint most of the time.
Per-MSRP cap: a fraction = ($36,294 + tax) ÷ (85% × greater of MSRP or $39,000 + tax). For high-end vehicles this further reduces the deductible amount.
Anything paid above these caps is a real outflow with no offsetting tax shield — which is why this calculator’s after-tax line can diverge sharply from the sticker payment.
What about GST and PST in BC?
GST (5%) on a corporate vehicle is generally recoverable as an Input Tax Credit, but the ITC on a passenger vehicle is itself capped at GST on the prescribed amount (Class 10.1 / Class 54). Anything above that becomes a sunk cost.
PST (7%) is not recoverable in BC. It rolls into the capital cost of the vehicle for CCA purposes — meaning you do get a tax shield on it, but spread over many years at 30% DB.
On leases, GST and PST apply to each payment. GST is generally recoverable as an ITC; PST is an additional cost. Both are excluded from the $1,100/month deductibility cap (which is stated pre-tax).
Why does the implicit lease rate matter?
A lease is mechanically a loan: the lessor lends you the depreciation — the gap between the vehicle’s sticker price and its residual at term end — and charges interest. The interest rate is rarely disclosed, but you can back-solve it from the payment, the term, and the residual buyout.
If your bank will finance the same vehicle at 6.5% but the lease’s implicit rate is 9.5%, you’re paying a 300 bp premium for the option to walk away at the end. That can still be worth it for flexibility — but at least price it knowingly.
What does this calculator deliberately ignore?
Personal-use kilometres — if the vehicle is mixed-use, every deduction is prorated and a taxable standby/operating-cost benefit applies to the shareholder. That changes the picture materially; we’ve modelled 100% business use.
Sales tax on operating costs — fuel, repairs, and insurance are entered after tax for simplicity. GST on fuel and repairs is recoverable as an ITC if you’re registered; the marginal effect on the comparison is small.
Zero-emission immediate expensing (Class 54) — for new ZEVs, you may be able to expense the full capital cost in year 1 up to a limit, rather than at 30% DB. The calculator uses the standard 30% rate for both gas and ZEV but applies the higher ZEV cost cap.
Inflation in operating costs — held flat over the period. Add 2–3%/yr if you want to see growth.
Sales tax on resale proceeds — on private sale, you do not collect GST; PST may apply to the buyer but flows around your corporation.
When does leasing actually win on after-tax cost?
Rarely, but not never. The cases where leasing pulls ahead:
Short hold periods (2–3 years) where you would have lost the same depreciation buying, but without the friction of selling.
Vehicles right at the Class 10.1 cap ($38,000–$45,000 gas) where buying gets capped CCA but the lease deduction is still binding at a similar dollar level.
Heavy R&M-prone vehicles where the warranty value of a lease offsets several thousand dollars of out-of-warranty repairs you’d face owning.
High alternative cost of capital — if every dollar you keep on the balance sheet earns 30%+ in the business, the NPV cost of tying up cash in a vehicle can flip the answer.
We’ll model the actual numbers and the strategy around them.
A vehicle is one decision. The tax treatment ripples through standby benefits, GST returns, and your year-end planning. Let’s look at it together before you sign anything.
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