Truck Financing vs Leasing in Canada: Tax Comparison

Choosing between truck financing and leasing is one of the most financially impactful decisions for Canadian owner-operators. While the monthly payments may look similar at first glance, the tax implications can differ significantly—affecting not just your immediate cash flow but your long-term financial health.

In this guide, we’ll break down the key tax benefits of both options, compare their advantages, and help you determine which strategy aligns best with your business goals.

Whether you're looking to build equity, maximize deductions, or keep cash flow steady, understanding the nuances of financing vs leasing could save you thousands come tax season.

Understanding the Basics: Financing vs Leasing

What Is Truck Financing?

When you finance a truck, you’re taking out a loan to buy the vehicle. You’ll make monthly payments (principal + interest), and once the loan is paid off, the truck is yours.

• Best for: Long-term ownership and equity building.
• Example Use Case: You plan to keep your truck for 7–10 years and want to own it outright.

What Is Truck Leasing?

Leasing means renting the truck for a fixed term—usually 3 to 5 years. At the end of the term, you may return the truck, renew the lease, or buy it at a predetermined value.

• Best for: Lower upfront costs and regular access to newer models.
• Example Use Case: You prefer to avoid repair costs and upgrade your truck every few years.

Tax Advantages of Truck Financing

Financing offers several long-term tax advantages under Canada’s Capital Cost Allowance (CCA) rules and interest deduction guidelines.

1. Capital Cost Allowance (CCA)

• You can depreciate the truck over time and deduct this from your business income.
• In Canada, trucks are typically depreciated under Class 10 or 16.
• CCA provides significant deductions, especially in the first few years.

✅ Pro Tip: Accelerated Investment Incentive (AII) rules may allow larger CCA claims in the year of purchase.

2. Interest Deduction

• The interest portion of your loan payments is 100% tax-deductible.
• This can reduce your taxable income year over year.

3. Ownership Equity

• As you repay the loan, you build equity in the truck—a tangible business asset.
• This can strengthen your balance sheet, making it easier to secure future financing.

📌 Related reading: Understanding the Basics of Truck Loans

Tax Advantages of Truck Leasing

Leasing offers simplicity, with more immediate tax benefits for some businesses.

1. Full Lease Payment Deduction

• Lease payments are typically fully deductible as a business expense.
• This can provide higher deductions in the short term vs CCA depreciation.

2. Predictable Monthly Costs

• Leasing simplifies tax reporting since deductions = lease payments.
• This makes it easier to forecast cash flow and tax liabilities.

3. No Asset Ownership = No Depreciation Management

• You don’t deal with calculating depreciation or tracking truck value.
• Ideal for operators who prefer operational simplicity over long-term asset building.

📌 Related reading: Hidden Truck Leasing Costs: What to Watch For

Truck Financing vs Leasing: Side-by-Side Tax Comparison

Feature	Financing	Leasing
Ownership	Yes (after loan term)	No (unless you buy at end of lease)
Tax Deduction Type Which Option Is Right for You? Choose Financing if: You want to build long-term equity in your vehicle. You're planning to keep the truck for 5+ years. You want to take advantage of CCA and interest write-offs. Choose Leasing if: You prefer predictable monthly expenses and fewer tax calculations. You want newer trucks without long-term ownership. You need to optimize short-term tax deductions. Bonus: Combine Financing with Smart Cash Flow Tools You may not have to choose one or the other in isolation. For example: Finance your truck, but also apply for Working Capital & Line of Credit to cover fuel, repairs, or slow-pay invoices. Lease the truck but use Invoice Factoring to ensure steady cash flow while you build your business. 📌 Related: Working Capital Loans for Trucking Businesses in Canada Mehmi Financial Group Can Help You Decide At Mehmi Financial Group, we specialize in helping Canadian truck owner-operators access the right funding strategy—with minimal paperwork, fast approvals, and over 30 lenders competing for your business. Whether you're leaning toward truck financing, TRAC leases, or just want to compare lease vs finance tax benefits, our team can walk you through the best structure for your situation. ✅ Apply now to get a quote in under 48 hours. ✅ Or speak to a financing advisor to explore your options. Frequently Asked Questions Is lease payment or financing better for tax in Canada? It depends. Lease payments are immediately deductible, making them better for short-term tax relief. Financing lets you claim depreciation (CCA) and interest, which may offer larger deductions over time. Can I claim CCA on a leased truck? No. Since you don’t own the asset, you cannot claim Capital Cost Allowance on a leased truck. You can only deduct lease payments. Can I switch from leasing to financing? Yes, many leasing agreements include buyout options at the end of term. You can also use refinancing to purchase the vehicle earlier. Do I need a down payment to finance a truck in Canada? Not always. Some lenders offer 0 down financing depending on your credit and business history. Learn more in 0 Down Truck Loan. ‍ Contact Us! Read about our privacy policy. Thank you! Your submission has been received! Oops! Something went wrong while submitting the form.