Keep these seven tips in mind when buying a car for your business.
- Tax advantages are available to those who purchase a company car for their businesses. Mileage and other expenses can be write-offs.
- Evaluate car options carefully before buying a company vehicle. The size and model of the vehicle should fit the intended use.
- You need to decide between leasing and buying a company car. Because of depreciation, leasing may make more financial sense.
Benefits of buying a company car
The major benefit of purchasing a company car is the tax advantages. 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.
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. You can also use a company car as an employee perk.
Key takeaway: The biggest advantages of buying a business car are tax benefits and avoiding impact on your personal auto insurance plan if there is an accident.
Looking to buy a car for your business? What could possibly go wrong?
A lot, it turns out. Plenty of thought needs to go into the model you're looking to buy. Too big or too small a motor will inevitably lead to lost money.
It could be the fact that your purchase needs to anticipate the actions of your business and its growth, or it could come down to underestimating just how much usage a business car will have, but purchasing a vehicle for your company always seems like a tricky task.
Not to worry, though. They say trial and error is an effective problem-solving method, so why not learn from the mistakes others have been guilty of in the past?
Here are seven things to keep in mind when buying a car for your business.
1. Choose the size carefully.
Aesthetics are fine, and choosing a German car might be a fun statement of ambition from your business, but is it going to be much use at 2:30 p.m. on a Wednesday when it's needed to shuttle four weary colleagues with a boot full of sample goods to a client two towns away?
Consider all the regular journeys your business's car will make and assess how much space you'll need. Perhaps an estate 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. Keep the important add-ons in mind.
When buying a car for your business, consider what optional extras are imperative for you. Extras can hold a few benefits, practically speaking, while limiting depreciation and potentially boosting safety.
If your vehicle is going to embark on longer journeys, then satellite navigation can rightly be considered essential. If you're a local company appealing to a limited audience, then GPS may only serve as a battery-draining albatross in your dashboard.
Cosmetic additions like alloy wheels and a metallic paint job, while not essential, help fight off depreciation and instill a sense of prestige for your brand while it's on the move. Consider passenger airbags crucial if your business car will regularly carry employees to locations.
3. Don't underestimate the competition.
It's always good to let your work do the talking, but what if your rivals are using newer, slicker vehicles than you?
Fending off the competition while showing off the prestige of your brand on the go is a bit of a tightrope to walk. You don't want to overspend and shorten your cash flow by refilling an extravagant, large-engine car every three days, but you don't want to look inferior either. Make sure that you can hold your own in a competitive market with your vehicle choice while not being drawn into an unnecessary purchase on a decadent motor.
4. Consider aesthetics.
On a similar note, a company car represents your brand to any onlookers. It can be an unexpected source of advertising, and if it's aesthetically pleasing, then you may just gain some customers out of it.
If you're partial to having your business represented by a company motor, then you don't want something that blends into the crowd when navigating the high street. A more eye-catching car, whether it's beautiful or just a little bit different, guarantees that your business will be noticed.
5. Stay true to your purpose and review your options properly.
Throughout the buying process, you need to stay committed to using your business car for its intended purposes.
While shopping the market for a vehicle that matches your intentions and ambitions, you'll likely be met with plenty of offers and bargains. Just make sure that you seriously ask whether or not the car you're looking at can cope with the demand that'll be put upon it. Whether it's for a 9-to-5 shuttle between offices, regular liaising missions or door-to-door marketing, make sure you get the type of vehicle that you set out to buy originally.
Tip: There's also an option for business contract hire, which may save you on taxes and capital.
6. Prioritize fuel economy.
The last thing you want after adding a vehicle to your workforce is to pay it a high-roller salary just to keep up with constant refueling.
Sometimes you can justify getting a fancy car for personal use – if it's a sports car or an executive-quality motor – but it's an awful lot harder to budget a 5.0 engine on the books when you're simply transporting your auditor between offices. Keep an eye on your chosen car's fuel economy by using online miles-per-gallon calculators; it could save your company a fortune.
7. Get your business car insurance right.
Make sure your business's motor is appropriately insured. Standard policies don't typically carry the level of protection that you may require if you're using your car for work purposes. Considering the disparity between business-level insurance and standard rates, it can be tempting to skimp on your cover, but the risk of having your policy invalidated is too great to sidestep this.
There are typically three business car insurance categories: business use by you, business use for all drivers and commercial traveling policies. It's best to explore these levels of coverage and go with the most appropriate for you and your company.