If you want to buy a car as a self-employed person, you are faced with a choice: buy it on a business basis or buy it privately? Both options have financial pros and cons. We would like to help you make the right choice in this article.
Car business or buy private
When do you choose private and when business?
Do you go for business or still private? That choice depends on a few things. For example, how often will you use the car privately? Which tax advantages do you want to take advantage of? And how do you want to finance the car? It is a matter of weighing up the pros and cons.
A business car can be smart if:
- you are going to use the car mainly for business purposes and can therefore deduct most costs on a business basis.
- You want to take advantage of tax benefits such as VAT deduction.
- you want to settle all car expenses through your company.
After all, this is how you keep the costs manageable and make the most of the tax benefits.
A private car can be an economical choice if:
- You use the car mainly privately.
- you drive few business kilometres and prefer to get a mileage allowance.
- you don't want any hassle with the administration of a business car.
That way, you keep it simple and flexible.
Private car used for business purposes (deductible expenses, VAT, mileage registration)
Do you use your private car for business trips? Then you may deduct a fixed amount per kilometre from your profit (€0.23 per km in 2025). Under certain conditions, you may also reclaim part of the VAT on maintenance and fuel. However, you must keep accurate mileage records. That way, you can prove how many kilometres you drove on business.
Buying a business car
Advantages of a company car
- You can deduct all costs, such as fuel, maintenance and insurance, on a business basis.
- Are you subject to VAT? Then you can reclaim VAT on purchases and expenses.
- Do you use the car for business purposes only? Then you don't need to keep any mileage records. Nice and easy!
Disadvantages of a company car
- If you use the car privately, you will have to deal with additional taxes.
- The car falls under your business assets, which may affect your profits and taxes.
- Selling the car may be less flexible as the car is registered as a business.
What about VAT?
Are you buying a car on a business basis? Then you can reclaim the VAT on the purchase and running costs. However, this only applies if you use the car for VAT-taxed activities. Do you also drive it privately? Then you have to make a correction and repay part of the VAT.
Example:
Suppose you buy a €30,000 car (excluding VAT). The VAT is then €6,300. If you use the car entirely for business, you can reclaim this amount in one go. Do you also use the car privately? Then you have to apply an annual VAT correction, e.g. 2.7% of the catalogue value, which amounts to €810 per year (for a €30,000 car).
Business lease or buy
When is leasing more advantageous than buying?
Leasing can be a smart choice if you don't want to invest a large amount of money in a car but need business mobility. There are two types of lease:
- Operational lease: You rent the car and do not own it. Costs such as maintenance, insurance and road tax are included. At the end of the term, you return the car. This offers convenience and predictable monthly costs.
- Financial lease: You buy the car on credit and eventually become its owner. You pay a fixed monthly amount, but are responsible for maintenance and insurance.
Leasing a car is attractive to business owners who low start-up costs want and not wanting to tie up large capital. With operational leasing, the car remains off your company balance sheet, while financial leasing puts the car on your balance sheet as an investment. The choice depends on your financial situation and preference for ownership.
Buying a car for business and using it privately
How does additional taxes work?
Do you use a business car privately (more than 500 km per year)? Then you have to deal with an additional taxable benefit. Additional taxable benefit is a percentage of the catalogue value of the car, which is added to your income. Electric cars are subject to a longer additional taxable benefit than petrol or diesel cars.
Example:
For a car with a list value of €40,000 and an additional tax rate of 22%, this means €8,800 additional taxable income per year. This amount is added to your taxable income. Suppose you fall in the 36.97% tax bracket, you will pay about €3,255 per year extra in tax because of the addition (€8,800 x 36.97%).
When is kilometre registration mandatory?
If you have a business car and drive less than 500 km privately, it is mandatory to keep your mileage records. This will help you avoid the additional taxable benefit. Accurate records are also required when using a private car for business purposes to correctly deduct expenses. This way, you can prove how much you drove on business.
Youngtimer scheme
The youngtimer scheme is ideal for entrepreneurs who want to drive a car 15 years or older for business purposes. Because instead of the original catalogue value, the addition is calculated on the daily value. And that can provide a considerable financial advantage. Especially for luxury cars, this makes a big difference.
Company or private car - Which suits you best?
The choice between a private or business car depends on how you use the car, your finances and the tax advantages. Do you drive many business kilometres or mainly private ones? Make a calculation based on your expected mileage and costs. That way you will know which option is most advantageous for you.
Frequently Asked Questions
What should I look out for when buying a used car?
Are you buying a used car? Then the choice between business or private is extra important. Because due to lower depreciation and often more favourable additional tax rate, a used car can be more financially attractive.
How does the margin scheme work with a car?
The margin scheme applies to used cars from traders who do not put the VAT separately on the invoice. That means you cannot reclaim VAT. And that, in turn, can affect the overall cost.
Is buying a car on a business basis advantageous as a self-employed person?
For self-employed people, a business car can be financially attractive due to deductible expenses and VAT refunds. But beware: additional taxes and extra administration are also part of the equation. By carefully weighing up all the tax aspects, you can decide whether business or private driving suits your situation best.
