Is Your Business Ready To Buy Its Own Company Vehicles?
As of August 2019, there are a total of 1,198,419 units of brand new light trucks sold all over the US. This denotes a 16.4 percent increase compared to sales in 2018, showing that a lot of businesses are investing in vehicles for their operations. Company vehicles could be used for a variety of reasons, such as delivering their products, setting up a food truck, or meeting their clients. Yet, how can a small business determine if they can already invest in a vehicle? Here are some of the factors that you need to consider to see if your company has the readiness to make the big leap and buy a vehicle for your business.
Assess The Business
Before talking to a sales agent to find your ideal vehicle for your business, you need to take a look at your business. Find out if you need a car for deliveries, transporting staff to an outside venue for a meeting, or for picking up large supplies. If you are spending a lot of money on renting a car for these purposes, then you should consider buying a new vehicle for your company. Having a vehicle that belongs to your business can seem like a major investment, but if it ends up offering cost-savings and convenience at the end, it will be worth it.
You must also check your company’s capacity to spend before buying a car. If your finances are low and are having a hard time looking for funding, then spending on a new car may not be a good idea. But if your financial status showed that you are earning big profits regularly and maintains a good cash flow, then you have the capacity to make the big purchase. This will not interfere with your other expenses like the utilities and payroll of your staff.
Select The Right Types Of Vehicles
You must have an idea of what you are looking for if you want to get a new vehicle for your business. But aside from the aesthetics of the car, you should consider several factors before you make a decision. First, you have to look at the sticker price of the vehicles that you want to purchase. Then you have to choose whether you want to buy a diesel-fuel car, an electric car, or a hybrid company vehicle so you can factor in the fuel cost on your budget.
Other business owners may also consider the brand before purchasing a car. According to a recent Manta survey, more than half of the respondents choose to buy US-made cars, 10% select Japanese cars, while 5% opts to buy German-made cars. In addition, you need to know which type of car will suit the needs of your business. You can choose between a truck, a van, or a regular sedan, depending on how your company will use it. Also, you may consider the vehicle’s estimated resale or residual value before you make the purchase. This will possibly help you avoid regretting your actions later on especially if you have plans to resell or trade it in the future.
Check Your Budget
After assessing your business, you need to start looking into your budget to see if you can afford to buy company vehicles. Since vehicles can be a big investment, you need to release quite a substantial amount for it. Aside from the actual cost of the cars, you also need to spend on other items that come with vehicle ownership. It includes vehicle registration, licensing and insurance for commercial vehicles. You also need to include regular car maintenance and repair, tolls, mileage, and garage rent or parking fees in your company’s monthly budget.
If you do not have the cash to make an outright purchase, you may apply for a loan to acquire a vehicle. For small businesses, you are required to go through a commercial credit application. This may need you to act as a personal guarantor for your company. The lenders also have to evaluate the credit rating of your business. Because of this, you need to have a good track record in paying all your debts regularly.
Know Where To Shop
Finding the best car for your company is now a breeze, thanks to the Internet. You can even compare models and features without leaving your desk. If you need to check if the car that you are considering has a good safety and repair feedback, you can visit websites like Consumers Reports. You can also check out different online car finder sites to know and compare several cars at once. This will also allow you to know how much you need to spend on a particular car so you will not be surprised when you talk with your car dealer.
Find The Perfect Timing
When the economy is bad, most car dealers tend to come up with different offers to sell. They would either reduce their sticker prices or come up with irresistible loan terms. If you can still afford to buy a car during the economic regression, then this is the best time to buy your company car.
But if the economy is thriving and you still need to buy a car, then opt to make the deal during the months of December and January. These are times when the car dealers will do everything to sell all the remaining previous car models that were not sold when the new models came out in autumn.
Should You Buy Or Lease?
It is not unusual for business owners to think twice about buying a company car because of budget constraints. That is why some would choose to lease instead. Those who use this option could have the chance to get more expensive vehicles than their budget could afford.
There are several advantages when leasing a car for business. For example, leased business driving has a similar standard mileage rate with those that are owned. Yet choosing to lease a car for company use may also be considered impractical if it will be used a lot. This is because the majority of the leases may charge more if the annual mileage incurred will exceed over 15,000. So you really have to factor in all your needs before you choose to lease or to buy a car for your company.
Income Tax Filing
Buying a commercial vehicle as part of your company’s property is not just an added expense. It can also help you lessen the tax that you need to pay at the end of the fiscal year. The costs of commercial vehicle maintenance, the mileage, and the car loan interests can all be recorded as tax deductions even if your company only owns a couple of cars. These will help reduce the tax that you need to pay annually.
You check the Publication 463 of the Internal Revenue Service, which is also called the Travel, Gift, and Car Expenses. It stated how to see if the standard mileage rate applies as well as the possible effect of vehicle depreciation on your company’s annual tax status. But since tax laws may change from time to time, it would be best if you will with a tax expert who will tell you how your company vehicle can reduce the tax that you need to pay.
Commercial vehicle purchases can be costly for small businesses. Yet, having your own company vehicles can give you more benefits than liabilities. You might not expect how much money and time your business will save with the help of the new vehicles in the long run.
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