If you’re reading this article, it means you’re thinking of getting a car for your business, and there are plenty of good reasons why you’d want to do this. You reach a certain point when you just can’t run your company using the family car anymore.
Whether you like it or not, the car you drive as a business owner says something about your business. And it doesn’t matter what industry you work in. You still need a presentable company car that puts you in a good light when meeting with prospects and clients. You might be a walking talking marketing machine, but if you show up to a meeting in a beat-up old car, even the most enthusiastic of clients will have second thoughts.
We know that as an ambitious entrepreneur, you’d go to great lengths to save money so you can invest it in your company. Some people will even sell their cars and ride a bike. At the same time, some startup founders will use branded cars that stand out in a crowd as a way to create a bit of buzz and name recognition, even if they don’t really need those cards and only use them to commute to work and back.
Even if you’re buying a company car for your own use, since you can write off part of the cost, it can end up being cheaper than if you bought it privately. And if you’re planning to have several of your company’s representatives use it for business purposes, the insurance will most likely be cheaper. Plus, once again, you have more control over your company’s image. You don’t want your representatives showing up to meetings with clients in beat-up old cars either.
Having said that, if you have a small business that operates on a tight budget, a company car might be a big expense. Luckily you have a few options. Well, you have hundreds of options. It’s a big market, and you’ll find cars at any price point. You should look at a company car the same way you would at any asset. It’s no different than your office equipment.
In this article, we will show you how to find the best car for your business needs.
Talk to Your Accountant
Before you start googling SUV for sale, you should discuss buying a company car with your accountant. You need to figure out your budget because if you go straight to the dealership, you might get carried away and spend more than you can afford.
Your account will also be able to aspects like write-offs and tax implications. One of the biggest advantages of buying a car through your company is that you can deduct some of the cost. Keep in mind that you can only deduct business-related expenses. However, you can deduct the interest you pay on the loan, for example. You’ll also get depreciation bonuses. This will help you decide whether it’s better if you buy a used car or a brand new one. For new cars, there are also more rebates and other incentives from car manufacturers.
Then there’s also the option of leasing a car. This has the advantage that you can declare lease payments as an operational cost right from the start. There’s no delay when it comes to reclaiming the money. It also makes calculating your budget a lot simpler because you’ll have a predictable payment every month, and you don’t have to worry about maintenance and repairs.
However, there will be some restrictions on how you can use the car, and you don’t actually own the car, so it’s not an asset. If you do buy the vehicle at the end of your lease, it will cost more than if you bought a car by paying upfront or taking a car loan.
In the case of a capital lease, you’ll own the vehicle in part, and you can buy it at the end, so you’ll still be able to claim tax deductions for lease payments and depreciation.
If you opt for buying a car, know that some will qualify for tax breaks while others don’t. Moreover, you can choose to write off the actual cost or mileage. Buying is cheaper than leasing, but that’s only long-term. Still, since you own the car, you get more flexibility. You can upgrade it however you want and can put your logo on it.
Whatever you decide with your accountant, make sure you check the contract for hidden fees.
Be Clear About the Purpose of the Car
If you’ll be using the car yourself, as we mentioned before, the deductions will depend on whether you’re using it for business purposes or personal use.
If you’re buying the car for your employees to use, for example, to meet with clients, and several people will share it, then you’ll want something with good gas mileage that’s easy to get around in. You can also track miles for tax deduction purposes.
Then you have to think if you want to get the type of car that will impress your clients or business partners or do you need it for practical purposes like making deliveries.
Heavy vehicles like SUVs get higher write-offs from the IRS, but it has to meet certain specifications, and there are restrictions. Once again, you’ll want to discuss this with your accountant.
Remember Your Company’s Image
Once you’re clear on your budget, tax deductions, and the car’s purpose, you have to take into account how the car reflects on your company’s image. For example, if you’re doing business in the environmental sector, you don’t want to drive around town and go to meetings in a Hummer or Range Rover. It might lead people to doubt your commitment to your company’s mission.
Maybe you’d prefer the type of car that flies under the radar and just gets you from A to B as hassle-free as possible, or perhaps you’re more interested in something flashy that will help you attract high-end clients.
It also has to fit people’s expectations from your sector. For instance, if you work in construction, a truck will be a sensible choice, while a sedan or SUV is suitable for someone in real estate.