Header bg
  • section background

    Buying a car for your business? Here are the tax implications

    Hero bg 2

    Cars are expensive. If you include depreciation, owning a car can cost between $8,600 and  $13,000 a year. Although some people get away with public transit and ridesharing, owning a vehicle may be a requirement for your small business or self-employment.

    If you’re a real estate agent who needs to drive clients or a small business that needs to make deliveries, owning a company car isn’t a choice. However, you may not need to swallow the whole $8,600 to $13,000 a year cost of owning a vehicle. There are many ways to reduce your taxes by expensing the costs of your business-related car usage.

    In this article, we reflect on what you can expense when purchasing and using a company vehicle.

    What car-related costs can you expense?

    Even if you use your vehicle for both business and personal use, you can still deduct a portion of car-related expenses from your taxes. Albeit, only a portion of the expenses such as gas and maintenance costs are allowed. You can expense parking fees related to your business and supplementary business insurance in full, however.

    To figure out what percentage of car-related expenses to deduct, you’ll have to keep a tab on the business-related kilometres you’ve driven. Recording this is extremely tedious, but there are now many smartphone apps to make it easier. Only vehicle expenses that are reasonable and that have a receipt can be expensed. Even if you want to the local second-hand market to, let's say, buy used cars in Centennial for your business expenses, ensure that such purchases fall under allowable deductions. Painting your car pink, for example, would not be considered “reasonable” in most circumstances.

    Common vehicle expenses include:

    • Licence and registration fees

    • Fuel and oil costs

    • Insurance

    • Interest on money borrowed to buy a motor vehicle

    • Maintenance and repairs

    • Leasing costs

    Make sure you’ve considered all of the costs before you grab those keys.

    How purchased and leased cars are expensed differently

    One of the most important decisions in running a tax-efficient business is whether to lease or buy a vehicle. While buying a vehicle can be more cost-effective, leasing one can be more tax efficient.

    When you purchase a vehicle, you can either purchase it outright or choose to finance it. When financing, you can expense any interest payments you make. But in both situations, you can claim a Capital Cost Allowance (CCA). The CCA allows business owners purchasing business assets to expense its value. This includes not only the purchase price but also any legal, accounting, or other fees associated with the purchase and the cost of improvements made to the asset. For cars, the maximum you can expense under this allowance is 30% of the car’s total cost (including any fees associated with the purchase from the prior list).

    One caveat to the CCA is that you won’t receive its full benefits when buying a luxury vehicle, as the 30% only covers up to $30,000 (though this number slowly increases with time). If you’re a real estate agent who may need a luxury vehicle for your job, it’s often better to lease a car instead. This is because a lease is treated more similarly to an average vehicle expense.

    While tax efficiency is important, it’s not the only thing to think about when deciding whether to lease or buy a car for your business. Car loan payments are usually higher than the cost of a monthly lease, leased cars usually have a maximum number of miles that you can drive on it, and buying a car means you’ll have to sell it once it’s no longer needed.

    Purchasing a car for your business is a large investment and maximizing the tax savings you get with the purchase is a complicated process. Whether you choose to lease or buy, make sure that purchasing a car is a must for your company and not just a nice-to-have. To make the most out of your investment and expenses, speak to an accountant and do significant research first.

    Originally published June 19, 2019, updated July 5, 2024

    Back to APOLLO Magazine
    Share this article

    Get a quote in less than a minute

    Get no-nonsense coverage that's the best value for your money. Purchase policies from your computer or phone, receive your documents instantly, and save when you buy online.

    Get a free quote

    4.6 rating

    Google Logo

    Get a quote in less than a minute

    Get no-nonsense coverage that's the best value for your money. Purchase policies from your computer or phone, receive your documents instantly, and save when you buy online.

    Relevant articles

    section background
    section background

    Getting insured is as easy as 1 - 2 - 3

    Tell us (very little) about yourself

    Tell us (very little) about yourself

    Just tell us your address, your name, email and phone number. And that's it. We'll give you a price in less than a minute.

    Pay online easily and securely

    Pay online easily and securely

    You can choose to pay monthly or save money by paying for the entire year in one easy payment.

    Get your documents in your inbox - instantly

    Get your documents in your inbox - instantly

    As soon as you complete your purchase, you'll find your proof of insurance and policy documents waiting for you in your inbox.

    Get covered today - it couldn’t be easier

    We’ve provided more than 1,000,000 quotes to Canadians just like you. Give it a try!

    Google Logo


    4.6 rating

    1,861 reviews

    view all

    Across Canada

    Contact Us
    Apollo logo

    © 2024 APOLLO Insurance Solutions Ltd.

    111 Water Street, Unit 210, Vancouver, British Columbia, V6B 1A7

    APOLLO Insurance Agency Ltd. (o/a APOLLO Brokerage in the province of Ontario only) is a licensed retail brokerage, offering our clients with a comprehensive set of insurance solutions to meet their individual needs. APOLLO Insurance Agency Ltd. maintains necessary corporate licensing in provinces across Canada. Availability of products and service depends on licensing and product availability. The information that appears on this page is provided for information purposes only. Advertised products and prices are not guaranteed and vary based on insurance provider and/or insurance company's discretion and product availability.

    Transparency and Disclosure: APOLLO Insurance Agency's role is to provide you with exceptional service and the best insurance products that suit your needs. As a licensed retail brokerage, our compensation is based on a commission basis already built into your insurance premium and varies based on the product purchased through our platform. For a description of how APOLLO Insurance Agency is compensated and how this is calculated, please refer to our Compensation Disclosure document. For consumers in Ontario, please review the RIBO Conduct Fact Sheet and the RIBO Conduct Guidance document.