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Updated Feb 14, 2024

Buying a Car for Your Business? How to Avoid Mistakes

Ensure you're making the best investment for your company.

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Written By: Jennifer DublinoSenior Writer & Expert on Business Operations
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Do you need a company car, truck or van? The right vehicle can make your business run more smoothly and save money you’d otherwise spend on shipping, delivery or rental costs. However, since vehicles are expensive, it’s critical to make the right vehicle-buying decision.

We’ll explore seven tips for buying a business vehicle, explain the benefits of company cars, and share warnings about what could go wrong if you acquire the wrong vehicle. 

Did You Know?Did you know
Many businesses debate buying or leasing a company car. While a lease offers easy turnover and lower monthly payments, buying means you don't have mileage limitations and can customize your vehicle.

Tips for buying a business car

Remember the following seven best practices when buying a vehicle for your business.

1. Choose your business vehicle’s size carefully.

Aesthetics are fine, and choosing a sports car might be a fun statement of ambition from your business. However, will it be of much use at 2:30 p.m. on a Wednesday when it’s needed to shuttle your weary sales team with a trunk full of sample goods to a client two towns away?

Consider all the regular journeys your business’s vehicle will make, and assess how much space you’ll need. Perhaps a sedan is the most logical solution. Maybe you’ll need a van to complete all your tasks. A moment of introspection goes a long way here.

2. Consider crucial business vehicle add-ons.

When buying a car for your business, consider what optional extras are imperative for you, if any. Extras can bring practical benefits, limit depreciation and potentially boost vehicle safety — which is just as critical as workplace safety.

For example, if your company vehicles need to go on longer journeys, GPS fleet management solutions are essential. But if you’re a local company that will operate one car and serve a limited audience, satellite navigation may be a battery-draining albatross in your dashboard.

Consider passenger airbags crucial if your business car will regularly transport employees, customers or vendors. And while not essential, cosmetic additions like alloy wheels and a metallic paint job help fight off depreciation and instill a sense of prestige for your brand while the company car is on the move. 

Did You Know?Did you know
Safety isn't just a benefit — it can protect your business's future, particularly if you operate a fleet of vehicles. Fleet safety compliance will protect your employees, assets and reputation.

3. Don’t underestimate the competition’s company cars.

It’s always good to let your work do the talking, but what if your rivals use newer, slicker vehicles than you do?

Keeping your business competitive while showing off your brand’s prestige on the go is a tightrope to walk. You don’t want to overspend and shorten your cash flow by gassing up an extravagant, large-engine car every three days. However, you don’t want to look inferior to the competition. 

Ensure you can hold your own in a competitive market with your vehicle choice, but don’t be drawn into the unnecessary purchase of a fuel-guzzling motor.

4. Consider aesthetics when purchasing a business car.

A company car represents your brand. It can be an unexpected source of advertising. If it’s aesthetically pleasing and compelling, you may even generate new sales leads.

If you’re partial to having your business represented by a company vehicle, you don’t want something that blends into the crowd. A more eye-catching car, whether it’s beautiful or just a little bit different, guarantees that your business will be noticed.

TipBottom line
For an eye-catching vehicle, consider doing a complete branded car wrap to represent your brand image.

5. Stay true to your purpose and review your vehicle options properly.

Throughout the buying process, stay committed to your business vehicle’s intended purpose.

While shopping the market for a vehicle that matches your intentions and ambitions, you’ll likely be met with plenty of tempting offers and bargains for vehicles that aren’t what you set out to buy. It’s crucial to determine whether any vehicle you’re considering can cope with the demands it will face. 

Whether it’s for a 9-to-5 shuttle between offices, regular liaising missions, or door-to-door marketing, purchase a vehicle that can do the job.

6. Prioritize fuel economy when buying a business car.

After you add a vehicle to your workforce, the last thing you want is to pay exorbitant costs for constant refueling.

Sometimes you can justify a fancy car for personal use if it’s a sports car or an executive-quality vehicle. However, it’s difficult to justify a 5.0 engine when transporting your CPA between offices. 

Keep an eye on your chosen car’s fuel economy using online miles-per-gallon calculators. Alternatively, consider a hybrid or electric vehicle. 

Bottom LineBottom line
If you use electric or hybrid vehicles, make your choices part of your sustainable business model and use your environmental commitment in your marketing materials. 

7. Get your business car insurance right.

Purchasing the right commercial auto insurance is crucial. Standard business insurance policies don’t typically carry the level of protection you may require if you’re using your car for work purposes. 

When you consider the disparity between commercial auto liability insurance and standard car insurance rates, you may be tempted to skimp on your coverage. However, the risk of invalidating your policy is too significant to sidestep adequate coverage.

There are typically three business car insurance categories with various commercial car insurance costs

  • Business use by you
  • Business use for all drivers 
  • Commercial traveling policies

It’s best to explore these coverage levels and choose the most appropriate for you and your company.

Did You Know?Did you know
Business vehicle accidents can lead to costly insurance claims for companies. An accident involving an uninsured or underinsured company car, truck or van can financially devastate your business.

Benefits of buying a company car

Buying a company car can bring significant benefits to your business, including the following:

1. Buying a company car brings tax advantages.

A significant benefit of purchasing a company car is the tax advantages. Many business owners know that some insurance costs are tax deductible. However, they don’t realize they can deduct car insurance premiums and expenses beyond deductibles if the car is used exclusively for business purposes. 

According to tax software provider Intuit, you should assess the best way to claim your company car before doing annual taxes. You can deduct by mileage or by the actual expense of the car. Calculate mileage and expenses related to the business car and share these figures with your accountant.

2. Buying a company car can protect your personal insurance rate.

An additional benefit of a company car is that it has no impact on your personal auto insurance plans. If the vehicle is involved in an accident, your personal auto rates are not negatively affected. 

TipBottom line
Understanding your state's commercial car insurance laws is crucial. While your state mandates minimum coverage levels, consult your insurance agent to ensure you're getting adequate coverage for your business's needs.

3. Buying a company car can help you control your corporate image.

If a salesperson arrives at a prospect’s location and takes them to lunch in a clunker, your company image could suffer. When you own the vehicles your employees drive while they’re working, you can hit the right balance between successful and conservative. 

Unless your company sells luxury or premium products to very wealthy people, an overly expensive company car can make customers think your prices are too high. On the flip side, a too-cheap vehicle might convey that your company is struggling and, therefore, risky to do business with.

4. A company car lets you spread brand awareness.

Your business car, van or truck can include information like your brand name, logo, domain name, tagline, contact information and graphics. Everywhere your vehicle goes, it’ll spread the word about your company, what you do and how to contact you. Most employees would not be OK with this kind of branding on their personal vehicles.

5. A company car can help you attract talent.

A company car can be an attractive employee perk to work into the hiring process — especially when new employees will drive as part of their position. Imagine a salesperson who must drive regionally to visit customers. They’ll likely prefer to sign with your company if they can use a company car rather than go with a competing job offer that requires them to use a personal vehicle.

6. Buying a company car lets you specialize vehicle features.

A company car can include features you or employees might not have on private vehicles. For example, if you have a roofing company, you would need a truck with storage for ladders and a towing hitch for a trailer with tar and other supplies. If your company makes deliveries, a van with ample space for boxes would come in handy. 

When you have a fleet of vehicles, you can use one of the best fleet management services to ensure your drivers and their cargo are safe and where they need to be at all times. 

FYIDid you know
GPS fleet management can save your business money by reducing fuel and maintenance costs, preventing employee overtime and increasing productivity.

What can go wrong when buying a car for your business

Even with the best intentions, your company vehicle purchase can go south. Here are some of the biggest mistakes you can make when buying a car for your business — and how to avoid them. 

1. You buy a business car that’s unsuitable for your needs.

If you haven’t thought through your purchase and bought a car that’s too small or doesn’t have the features you need, the vehicle will end up being useless and an ongoing expense. 

Here’s how to avoid this mistake:

  • Understand your needs. Ensure you understand precisely how your company will use the vehicle, who will use it and how often it will be used. For example, if your team will use a vehicle for long drives, comfortable seats are a must. 
  • Test drive vehicles. Test drive different vehicles to see how they handle and become familiar with their features, including safety features.

2. You buy a company car you can’t afford. 

Vehicles that are too large or include too many added features will cost more upfront as well as monthly, with higher insurance and fuel rates. 

Here’s how to avoid this mistake:

  • Understand what you’re getting. Read vehicle reviews written by other business owners to identify potential advantages and disadvantages.
  • Determine insurance rates. Call your insurance company to preview rates for various vehicles. 
  • Look at fuel efficiency. Scrutinize each vehicle’s fuel efficiency and compare it to similar vehicles before purchasing.

3. You buy a business vehicle that needs many repairs.

Buying a lemon or a vehicle that requires painstaking upkeep can drain your cash. 

Here’s how to avoid this mistake: 

  • Research the model you’re purchasing. Before buying a new vehicle, read reviews about different models to weed out those with persistent mechanical issues. 
  • Ensure a used vehicle isn’t a lemon. For used vehicles, it’s even more critical to reduce the chance that your car will be inoperative often. Take the vehicle to be inspected before you buy or before your car’s grace period expires so you can get your money back if it turns out to be a lemon.

4. You pay too much for your business vehicle. 

Because vehicles are massive capital expenses, getting the best possible price makes sense. Paying too much drains your business’s coffers and derails your cash flow. 

Here’s how to avoid this mistake: 

  • Compare offers. Once you’ve decided on a model, get prices from different sellers and compare their offers. Let them know you’re considering other offers to see if they can sweeten the deal.
  • Negotiate the price. Cars typically have a good amount of profit built into their prices, so the art of negotiating may get you a better price. For example, you may receive an initial price on the vehicle and then offer to pay cash instead of financing it for an additional discount. If you’re financing the vehicle, research rates ahead of time. Get pre-approved and use this as an additional reason the dealership should discount your price.
author image
Written By: Jennifer DublinoSenior Writer & Expert on Business Operations
Jennifer Dublino is an experienced entrepreneur and astute marketing strategist. With over three decades of industry experience, she has been a guiding force for many businesses, offering invaluable expertise in market research, strategic planning, budget allocation, lead generation and beyond. Earlier in her career, Dublino established, nurtured and successfully sold her own marketing firm. Dublino, who has a bachelor's degree in business administration and an MBA in marketing and finance, also served as the chief operating officer of the Scent Marketing Institute, showcasing her ability to navigate diverse sectors within the marketing landscape. Over the years, Dublino has amassed a comprehensive understanding of business operations across a wide array of areas, ranging from credit card processing to compensation management. Her insights and expertise have earned her recognition, with her contributions quoted in reputable publications such as Reuters, Adweek, AdAge and others.
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