If you’re a business owner, you’ve probably asked yourself: Can I buy a car with my corporation? The short answer is yes—you can. But the real question is: Should you?

Buying a company vehicle through your corporation can be a smart move if it’s used strictly for business. But if there’s any personal use, you could end up paying more tax than expected. Before you drive that new car off the lot, let’s break down the do’s and don’ts of buying a company vehicle so you don’t get caught in a costly tax trap.

Can I Buy a Car in My Corporation? The Basics

Yes, your corporation can purchase a vehicle. That means:

✅ The company owns the car
✅ The company pays for the car’s expenses
✅ The company can deduct costs like gas, insurance, and maintenance

Sounds great, right? Not so fast. If you use that vehicle for personal driving, The Canada Revenue Agency (CRA) will view it as a taxable benefit (your personal tax bill goes up because CRA considers your use of the company vehicle part of your income) and you could be on the hook for extra taxes.

Personal vs. Business Use: Why It Matters

Let’s say your corporation buys a truck. If that truck is only used for business, then there’s no issue. The company can deduct:

✅ The purchase price (within CRA limits)
✅ Gas, insurance, repairs, and maintenance
✅ Lease payments (if leased instead of purchased)

However, if you use the truck for personal driving—even just for commuting to and from work—it’s considered a taxable benefit.

The two major taxable benefits you need to know about are:

1️⃣ The Standby Charge: A tax hit for having a company-owned vehicle available for personal use.
2️⃣ The Operating Cost Benefit: If the company pays for gas, maintenance, or other expenses for personal driving, that’s also taxable.

What Is a Standby Charge? (And Why You Want to Avoid It)

The standby charge is CRA’s way of ensuring that business owners don’t get a free company car for personal use. It’s calculated based on 2% of the vehicle’s cost per month (or 24% per year).

📌 Example:

Your corporation buys a $100,000 truck
You drive it home every night (personal use)
The standby charge added to your personal T4 is $24,000 per year

That means CRA will tax you as if you made an extra $24,000 in salary (even though you didn’t). Ouch.

How to Avoid the Standby Charge:
🚗 Have another personal vehicle—if you don’t, CRA may assume you’re using the company car for personal driving… and rightfully so. Do you really expect them to believe you’re taking the bus everywhere?
🚫 Don’t drive the company car home—park it at your workplace instead (or if you do, avoid direct travel to and from your main place of business – only drive it to/from jobsites).
📋 Keep a mileage log—you’ll need proof that the car is used strictly for business.

What Is an Operating Cost Benefit?

An operating cost benefit is a part of the extra taxable income you get when your employer gives you a car for both business and personal use. It represents the value of all the associated everyday expenses—like gas, oil, repairs, licenses, and insurance—that your employer pays when you use the car for personal reasons instead of just for work.

📌 Example:

Your employer gives you a car that you can use both for work and personal use and they pay for gas, oil changes, repairs, insurance, etc.
Since you’re saving money on these costs, the government says that this is a benefit; as such, you must pay tax on it.

How It’s Calculated: The government sets a rate (34 cents per kilometre as of 2025) which is used to determine operating cost benefit. So, if you drive 10,000 kilometres for personal reasons, you multiply 10,000 km × $0.34 = $3,400. This $3,400 is then added to your income for tax purposes, which means you may have to pay extra taxes on it.

In summary, the operating cost benefit quantifies the portion of a vehicle’s operating expenses that the employer pays on behalf of the employee for personal use. This benefit is taxable because it gives the employee a non-cash advantage by covering costs that they would otherwise have to pay themselves. The calculated operating cost benefit is added to the employee’s income and is reported on their T4 slip.

Should I Buy a Car Personally or Through My Corporation?

If you drive the car for both business and personal use, it’s often better to own it personally and get reimbursed by the company as an employee reimbursement. Doing it this way means:

✅ Your corporation can pay you a tax-free mileage allowance of 72¢/km (first 5,000 km) and 66¢/km after that (2025 rates).
✅ You avoid the standby charge and operating cost benefit tax hit.
✅ You don’t need to track personal vs. business usage—just log your business-use kilometres.

📌 When Does It Make Sense to Buy the Car in Your Corporation?

🚚 Your business requires heavy travel (e.g., sales reps, trades, consultants on the road).
💼 The vehicle is strictly a work vehicle (e.g., service trucks, delivery vans).
🏢 The vehicle is not used for personal driving (i.e., it stays at the workplace overnight).

Passenger Vehicles vs. Motor Vehicles: A Big Tax Difference

Not all vehicles are taxed the same way. CRA distinguishes between:

🚗 Passenger Vehicles – Regular cars, SUVs, and small trucks meant for carrying people.
🚚 Motor Vehicles – Work trucks and vans used to haul equipment, tools, etc.

Why This Matters:

If you buy a passenger vehicle, CRA limits your tax deductions (as of 2025):

📌 Maximum cost you can write off: $38,000
📌 Maximum deductible lease payments: $1,100/month
📌 Loan interest deduction limit: $350/month

However, motor vehicles (like work trucks) have no such limits. If your business needs a heavy-duty truck, buying it in the corporation is a much better tax move. Click here for more information on how CRA defines eligible vehicles.

What About Leasing Instead of Buying?

Leasing follows similar tax rules to buying. The big difference? Instead of depreciating the vehicle, you deduct the lease payments—up to $1,100/month for passenger vehicles (as of 2025).

🚗 Leasing pros:
✅ Lower upfront costs
✅ Easier to upgrade every few years
✅ Potentially higher deductions

🚗 Leasing cons:
❌ Still subject to the standby charge if used personally
❌ Mileage restrictions
❌ No equity in the vehicle

Leasing can be a smart move if you don’t want a long-term asset on your books, but the same personal use rules apply (ie. Standby charge).

Can I Buy a Car in My Corporation? Key Takeaways

✔ If the vehicle is 100% for business use, buying it in the corporation can be tax-efficient.
✔ If there’s personal use, you may need to allocate a standby charge and operating cost benefit.
✔ Owning the car personally and getting a mileage allowance can be simpler and more tax-efficient.
✔ Motor vehicles get better tax treatment than passenger vehicles.

Need Help Deciding? Let’s Talk.

Figuring out if and how to buy a company vehicle can be complicated. At NowCPA, we help business owners make smart tax decisions to maximize savings and minimize tax headaches.

📞 Book a consultation today and let’s find the best strategy for your business.

💡 Learn more tax tips by checking out our blog.

Can I Buy a Car in My Corporation? Your Guide to Buying a Company Vehicle