When a company (SL) needs a car, the question is almost always the same: buy it, finance it with a lease, or take it on long-term rental (renting). Before comparing the three, there’s one question that matters more than any other: will the car have personal use?
Before choosing: personal use or 100% business use?
If the car belongs to a sales rep, is a works van, or a fleet vehicle used only for work, it’s 100% business-use and everything it costs (the payment, depreciation, fuel, insurance, maintenance) is deductible for corporate income tax.
If the owner or director also uses it for personal life (typical of a “management car”), the personal-use portion is charged as a benefit in kind on the payroll of whoever uses it, with its own income-tax cost and withholding. Handled that way, that portion is still deductible for the company, like any staff remuneration; what can’t be deducted is personal use that goes undeclared. The benefit is valued at 20% per year of the acquisition cost (taxes included) if the company owns the car, or 20% of the new vehicle’s market value if it’s on rental or lease, with a reduction of between 15% and 30% for energy-efficient vehicles (the maximum for battery-electric and plug-in hybrids). In this scenario, the tax saving from “putting it in the company’s name” is smaller than it looks — the user ends up paying it through income tax — and the choice between buying, renting or leasing becomes secondary.
Buying: slow depreciation, cash tied up
The company buys the car and depreciates it under the official tables (passenger cars, up to 16% a year). The deduction is spread over many years and the outlay is full from the start, or it creates debt. It makes sense if there’s spare cash and the car will be used for many years.
Leasing: accelerated depreciation if you keep it
A lease is financing with a purchase option: on the books you capitalise the vehicle and depreciate it, but the special regime in article 106 lets you deduct the cost-recovery portion up to double the table rate (triple for small companies). In practice, you bring the deduction forward into the early years and reduce your taxable base sooner. It’s worth it if the company wants to keep the car and has borrowing capacity.
Long-term rental (renting): a flat expense with no admin
With renting you pay a monthly fee that includes the rental plus services (insurance, maintenance, roadworthiness test, tyres). You capitalise nothing: the full fee is deductible for the business-use portion. No upfront outlay, predictable cost and zero vehicle-admin paperwork. It usually works out slightly more expensive in total cost, but you’re paying for predictability and for not spending time on it. It fits well if you renew the car every 3 or 4 years.
VAT is the same for all three
Whether you buy, lease or rent, the input VAT on the vehicle (and on its fuel and maintenance) is deducted at 50% by legal presumption, unless you prove greater business use or you’re on the 100% list (taxi, driving school, sales reps, transport, security). We explain it in detail in how much you can deduct for your car. What changes is when you bear that VAT: all at once on a purchase, spread out with a lease, month by month with renting.
A worked example, over 4 years
Car 100% business-use (no personal use, to isolate the comparison), worth €30,000 + VAT (€6,300) = €36,300 total price.
| Buying | Leasing (4 years) | Renting (4 years) | |
|---|---|---|---|
| Upfront outlay | €36,300 (or separate financing) | No significant deposit | No deposit |
| Approximate monthly payment | — | ≈ €750 + VAT | ≈ €650 + VAT (includes insurance, maintenance, roadworthiness test) |
| What you deduct for corporate tax | Depreciation under the tables: up to 16% a year → €4,800/year | Accelerated depreciation: up to double the table rate (32%) in the early years → up to €9,600/year | 100% of the fee (business-use portion) → ≈ €7,800/year |
| Approximate tax saving on corporate tax (25% rate) | ≈ €1,200/year, steady for several years | ≈ €2,400/year in the first 2-3 years, then less | ≈ €1,950/year for the life of the contract |
| Recoverable VAT | €3,150 (50% of €6,300) all at once, on purchase | 50% of the VAT on each payment, spread over 4 years | 50% of the VAT on each payment, spread over 4 years |
| Does the car sit on the company’s balance sheet? | Yes | Yes | No |
| Insurance, maintenance, roadworthiness test | You arrange and pay for these separately | You arrange and pay for these separately | Included in the fee |
These are rounded figures to show the mechanics, not a price list: yours will depend on the model, the finance provider and the terms you negotiate. What stays consistent is the order of magnitude: leasing brings the tax deduction forward compared with buying, and renting trades part of that saving for not having to manage anything.
The bottom line
- Buying: makes sense if you have cash to spare and you’ll keep the car for many years (more than 6-7). It’s the option with the lowest financing cost, but the one that ties up the most cash from day one.
- Leasing: makes sense if you want to keep the car in the medium term and care about bringing the tax deduction forward in the early years. It requires borrowing capacity and some admin (insurance and maintenance are on you).
- Renting: makes sense if you change car every 3-4 years and prefer a fixed fee with no surprises or paperwork, in exchange for a somewhat higher total cost.
If the car will have personal use by the owner or director, work out the benefit in kind first (see above): in many cases it shrinks the tax saving enough that the choice between buying, leasing and renting stops being the main part of the decision.
Want to see it with your company’s real numbers?
Email us, no strings attached, at contacto@asesoriamadal.es and we’ll model it with you before you sign anything.