Should my company own my car?

When you have a profitable small corporation, you may wonder if it makes sense to buy or lease a “company car” for yourself. In most cases, we advise against this. Here’s an example:

Let’s say you bought a car on January 1 for $10,000 plus GST. You pay $900 per year for insurance, $2,500 for fuel and maintenance, and $600 for parking. You put 18,000 km on the car in the year – 80% of which is driving for work.

• If your company buys the vehicle and pays all the expenses, the total deduction (including CCA or depreciation) will be $5,575. This would save your company $669 in corporate tax.
  • However, you will also have to take into account that you (the individual) had access to the corporate vehicle and drove it for personal purposes. This would add at least $473 in taxable benefits to your personal tax return. In a 30.5% marginal tax bracket, you will pay $144 in taxes. But with the corporate savings, you are still coming out ahead by $525.

• But if you own the car personally and pay all the expenses out of your personal bank account:

The company can then pay you a standard reasonable mileage rate as defined by CRA. For 2018, this would be $7,356 or $883 in corporate tax savings. The best part, is that this reasonable allowance is non-taxable on your personal return, so you keep all the tax savings.

Each situation is different but in most cases, you will save money by purchasing or leasing the vehicle personally. If you have questions about how this would work for you, let us run the numbers for you.