If your company is consistently growing, you will get to a point where you’ll need to consider using a business vehicle. Whether it’s for your sales team, who are often on fieldwork, deliveries, or transporting passengers, having a business vehicle can benefit.
However, there are a few things to consider before getting one. Listed below are the things you need to think about.
Buy, Lease, or Rent?
There are specific benefits in buying, leasing, or renting a vehicle for business use. This is, in fact, one of the most important things to consider in getting a company vehicle. While buying a new car may be the best choice for most companies, it’s essential to know that you have other options. It’s about determining what’s best for your business.
Consider consulting a venture investment company to understand your options more. They can help you weigh the pros and cons of leasing, buying, and renting and how each of these can help your business grow and expand further.
Buying a vehicle can be expensive because there are other costs to consider. You’re not just going to pay for the car itself. You have to think about taxes, maintenance costs, and the annual fuel cost. If your business is not prepared for the extra expenses, you might end up paying too much for transportation than you’re supposed to.
Generally speaking, a company with stable revenue may not have a problem purchasing a new vehicle. However, keep in mind that each car model is different, and there is a corresponding fee for insurance, repair, maintenance, and registration. And often, the amount for these expenses will depend on the car’s model.
Consider your Company’s Image
Your company’s image will also play a crucial role in deciding the type of car you will purchase. Do you need a big van to transport goods and products? Or a fancy vehicle that will ultimately impress your high-end clients? Your car should represent the company’s image in the best ways possible. For instance, you can’t be driving an old pickup truck if your business is all about selling exclusive jewelry to wealthy clients. It doesn’t fit. Here are the three questions to ask yourself when choosing a car for your business:
- Who will use the vehicle? If the car is meant to deliver goods, you might need a big car with ample storage. On the other hand, if you’re buying a vehicle to transport people, a van with an enormous capacity is ideal.
- What is the purpose of the vehicle? Think about why you’re buying a car. Is it to impress your clients, or do you just want to be more practical?
- Who should own the car, you or your business? Keep in mind that putting the car’s registration under your name may not give you a tax advantage.
Overall, you need to ensure that the car you choose fits your business needs as well as your financial capacity.
One of the best benefits of purchasing a vehicle through your business is the tax advantage attached to it. Did you know that the operating expense for the car registered to your business is deductible?
In 2019, taxpayers claimed 58¢ for every business mile driven using the company vehicle. On the contrary, you can only deduct business-related costs if the company car is bought through the business owner’s name. You might need an accountant’s help to make sure that the numbers line up.
Furthermore, the most significant advantage of business vehicles is depreciation. The new tax law indicates that you can get substantial bonuses if a car is exclusively used for business. If the business car is used between Sept. 28, 2017, and Dec. 31, 2026, the owner will get a depreciation bonus.
You can expect to earn the following:
- 1st year- $18,000
- 2nd year- $16,000
- 3rd year- $9,000
- Succeeding year until the car loses its value- $5,700
Speak with your Accountant
Lastly, speak with your accountant before buying a car for your company. Your accountant will enlighten you about tax implications and write-offs, ensuring that your finances will not suffer once you buy a new car.
Generally, your accountant should explain if your revenue is stable enough for a vehicle. Sometimes, buying a used car is way better than buying a brand new one as it’s relatively cheaper. Remember that financing a company vehicle can be a long-term commitment. If you can’t afford a new one, your accountant can help you make adjustments so you can save up for a vehicle.
Buying a business vehicle is not the same as buying a personal car. When buying a business car, there are many things to consider, including finances, company needs, tax implications, and company image. Take the time to think things thoroughly to ensure that you’re buying or renting the best vehicle for your business.