Tax advantages of a more expensive car

Something to consider when buying a car which you mainly use for business purposes and/or if you can structure your package to include a traveling allowance.

The tax deduction for using a more expensive vehicle can be significant. Take the following example:

Interest rate: 10%
Finance period: 60 months



Your installment would be R3.7k more per month, about R45k more per year.

However if you travel about 25000km per year of which 20000km is business, the tax deduction would be as follows:



Meaning the tax deduction would be R71k more and the tax saving about R29k. So after tax the R425k car cost only R17k more per year!

You can also consider that after 5 years (lets say the car has depreciated by 60%) you have an asset worth R68k vs 170k. So you paid R17k per year for 5 year extra but the car is worth R102k more. You actually made R18k!

And all the time you had the pleasure of driving the more expensive car. If you calculate the same of a cheaper second hand car (no M/P) vs a new more expensive car you can also take the extra maintenance cost into account.

Just something to think about.