Yes, you can finance a car through a business; lender terms and tax breaks depend on business use, records, and your entity setup.
Buying a vehicle through a company can help cash flow, separate liability, and unlock tax deductions. The flip side: lenders still weigh risk, personal use can trigger payroll reporting, and sloppy logs sink deductions. This guide lays out the rules, choices, and steps so you can move from idea to keys with clean books and fewer surprises.
Financing A Vehicle Under A Company—Eligibility Rules
Most lenders will issue a commercial auto loan or lease in a company’s name when they see stable revenue, filed returns, and a business credit profile. Younger firms often face a personal guarantee or a co-sign. Expect underwriting to look at time in business, debt service coverage, and the vehicle’s use case.
Tax treatment centers on business use. The IRS lets you deduct either a cents-per-mile rate or actual costs. You pick one method per vehicle per year, then keep proof. Employer-provided cars and mixed personal use bring payroll rules into play, which we cover below.
Quick Definitions
- Commercial Auto Loan: A note secured by the vehicle, usually 24–72 months. May require a personal guarantee for newer firms.
- Commercial Lease: Contract to use the vehicle; payments can be deductible under actual-cost rules, subject to limits.
- Business-Use %: Miles or another reasonable basis to split business vs. personal use across all miles in the year.
Ways To Fund A Company Vehicle
Pick the path that fits your cash flow and tax goals. Here’s the lay of the land:
| Method | Cash Flow | Tax Treatment |
|---|---|---|
| Commercial Auto Loan | Down payment + fixed note; asset on books | Deduct via standard mileage or actual costs; interest may be deductible for self-employed; depreciation limits apply |
| Commercial Lease | Lower upfront; predictable payments | Deduct business share of lease under actual-cost method; income inclusion limits can apply to higher-value cars |
| Cash Purchase | Large outlay; no note | Deduct via standard mileage or actual costs; Section 179 and bonus rules may apply |
Tax Methods: Miles Or Actual Costs
Standard mileage rate. For 2025, the IRS business rate is 70¢ per mile. It bundles fuel, maintenance, depreciation, and more into one per-mile number. Keep a contemporaneous log (dates, destinations, purpose, miles). Source: IRS Notice 2025-5 (2025 standard mileage rates).
When The Per-Mile Method Fits
- High miles with a modest-cost car.
- You prefer simple tracking over saving every receipt.
- You didn’t claim Section 179 or special depreciation on this vehicle in the same year.
Actual costs. You total business share of fuel, insurance, repairs, tires, fees, and either depreciation (if owned) or lease payments (if leased). Keep invoices and allocate by business-use percentage. See IRS Pub. 463, Chapter 4 (car expenses).
Interest And Taxes
If you’re self-employed and the vehicle is used in the trade or business, the business-use portion of loan interest can be deductible; employees can’t deduct car-loan interest. Property taxes on vehicles can also be deductible subject to where they land on your return. See Pub. 463 for the interest and tax treatment lines and examples (Pub. 463).
Section 179, Bonus Depreciation, And Luxury Caps
Buying through the company can open accelerated write-offs under Section 179 and bonus depreciation, within guardrails. The numbers update each year and the rules differ for SUVs and passenger autos.
Section 179 Snapshot
- Tax years beginning in 2025 show a $1,250,000 max expense election with a phase-out starting at $3,130,000 of eligible purchases.
- Sport-utility vehicles between 6,000–14,000 lbs have a specific cap of $31,300 for tax years beginning in 2025.
These figures come directly from IRS Pub. 946, “What’s New for 2025” (Section 179 updates).
Bonus Depreciation Trend
Bonus percentage steps down over time. Pub. 946 details the percentages and timing windows; combine with the auto “luxury” limits and your business-use percentage when modeling deductions (bonus rules).
Payroll And Personal Use Of A Company Car
When an employee (or owner-employee) drives a company car for personal miles, that personal share counts as taxable wages. Employers must compute the fringe benefit value and include it in pay. IRS Pub. 15-B explains cents-per-mile and annual lease value methods, plus recordkeeping and W-2 handling (Pub. 15-B).
What Counts As Personal Use
- Commuting between home and the office.
- Errands outside a business purpose.
- Family members driving the vehicle.
Some vehicles—like certain delivery vans or marked police cruisers—can qualify as “qualified nonpersonal-use” vehicles, which changes the reporting outcome. Pub. 15-B lists these categories.
Title, Insurance, And Control
To keep the line between business and personal clear, place the title in the company’s name, carry commercial auto insurance with correct “named insured,” and route payments from a business account. If your lender requests a personal guarantee, keep that document in the corporate minute book along with board/member approval for the purchase.
Who Should Drive
Limit drivers to employees on the insurance schedule. If owners take the car home or allow family use, track those miles for payroll inclusion and adjust your logs and valuation method to match.
Leasing Versus Buying: Practical Trade-Offs
When A Lease Can Make Sense
- Predictable monthly cost and easier turn-in cycle for branded image or tech refresh.
- Lower down payment than many loans.
- Actual-cost deduction of the business share of rent, subject to high-value inclusion rules.
When A Loan Can Make Sense
- You plan to hold the car beyond five years.
- You want Section 179 or bonus where allowed.
- Mileage or condition fees on leases would stack up.
Recordkeeping That Survives A Review
Keep a mileage log that shows date, start/end, locations, business purpose, and miles. Capture odometer at year-start and year-end. Save fuel, service, insurance, registration, finance, and lease documents. For standard mileage, you still need a log; for actual costs, you need logs and receipts. Pub. 463 lays out examples and what detail examiners look for (see Chapter 4).
Common Deduction Methods At A Glance
| Method | Who Can Use | What You Claim |
|---|---|---|
| Standard Mileage | Owners and certain employees where allowed | Business miles × IRS rate; plus business parking/tolls; see notice for the year |
| Actual Costs | Owners and employers | Fuel, insurance, repairs, fees, lease or depreciation × business-use % |
| Section 179/Bonus | Owners placing eligible property in service | Up-front expensing within caps; bonus on the remainder where applicable |
Entity-By-Entity Notes
Sole Proprietor Or Single-Member LLC
Loan or lease can sit in the business name or your name. Deduct on Schedule C. If the note is personal but use is business, deductions still follow business-use percentage. Pub. 463 examples show the split for mixed use.
S Corporation
Company-paid vehicle for an owner-employee raises payroll inclusion for personal miles. Reimbursements through an accountable plan can keep reporting clean. Keep logs, and make sure payroll tracks the personal share per Pub. 15-B.
Partnership Or Multi-Member LLC
Decide whether the vehicle is a partnership asset or owned by a partner and reimbursed for business miles. Capital accounts, distributions, and fringe benefits can be affected by the approach you choose.
Real-World Cost Modeling
Before you sign, run both tax methods with your expected miles and a conservative business-use percentage. If you drive long routes with a modest car, per-mile often wins. If the car is costly and business use is high, actual costs with Section 179 or bonus can outweigh per-mile, subject to limits and caps.
Seven Steps To Close The Deal Cleanly
- Define use. Write a one-line statement of the vehicle’s job in the business (sales calls, service routes, deliveries).
- Pick the path. Loan, lease, or cash—matched to hold period and miles.
- Model taxes. Compare per-mile vs. actual; check Section 179 and bonus against business-use % and caps (Pub. 946).
- Structure ownership. Title in the company; review personal-guarantee language if requested.
- Set insurance. Commercial auto policy with the correct named insured and listed drivers.
- Set logs on day one. Adopt a mileage app or a paper log; capture odometer at delivery.
- Handle payroll if needed. If anyone takes the car home, set up a valuation method per Pub. 15-B and train payroll on the steps (company car fringe rules).
Mistakes That Cost Money
- No mileage log. Without one, deductions shrink or vanish.
- Mixing funds. Personal card for fuel and repairs leads to messy substantiation.
- Switching methods mid-year. You choose per vehicle per tax year; switching creates errors.
- Ignoring personal miles. Owner-employees who commute in a company car need payroll inclusion.
- Overstating business use. High percentages invite scrutiny; be able to show the work.
Decision Guide: Which Route Fits You?
If You Rack Up Miles
Lean toward the per-mile method, especially with a modest purchase price. The 2025 rate bakes in routine wear items and makes math simple (IRS notice).
If You Buy A Costly Workhorse
Run the actual-cost model with Section 179 and bonus, then compare to per-mile. Watch the SUV cap for tax years beginning in 2025 and the passenger-auto “luxury” limits in Pub. 946.
If Employees Drive It Home
Plan fringe valuation from day one under Pub. 15-B. Keep a short written policy on who can drive, where it can be parked, and how to log miles.
FAQ-Free Wrap: Clear Answers You Can Act On
You can place a vehicle in a company name and finance or lease it. Deductions hinge on business-use percentage, the method you pick (per-mile vs. actual), and compliance with fringe rules for any personal miles. Two steps matter more than anything else: keep a real log and store every finance, lease, and service document where your bookkeeper can find them. Tie your approach to the IRS pages linked above, and you’ll have both the steering wheel and the paper trail under control.