Buying a car is always a daunting prospect and buying one for a business is especially daunting. Yet, there are clear benefits to having a commercial car.
The most immediate thing you have to realise when buying a car for your business is that the car signals what your company’s values are. Like it or not, a company car sends a message, it’s part of your company’s image. For instance, it’s hard to square conservative fiscal values with a flashy car. In fact, it smacks of hypocrisy. Similarly, it’s hard to project success if your company car is an old jalopy.
When you’re buying a car, consider your company’s image; as well as your budget; the implications in terms of depreciation, write-offs, and taxes; and the possibility of getting a heavy vehicle.
The most obvious question is if you can even afford to buy a car and if so, if you can afford to maintain it and pay for fuel. Remember that beyond the sticker price, there are additional costs involved in buying a car. These range from registration and insurance fees, to maintenance and repair costs and differ from car to car.
According to the AAA, vehicles that are driven 15000 miles a year on average, cost around $8,469 in insurance and maintenance expenses.
As a rule of thumb the heavier the car, the heater is girl consumption and maintenance costs.
The Company’s Image
The type of business you’re in will go a long way to determining what kind of car you will buy. For example, if you’re in construction, you’re likely to have to buy a heavy car to carry tools other things you will need in the business, or to manoeuvre through difficult terrain.
In considering the company’s image, you should also take care to factor in who will be using the company car. For example, an accountant in a construction company will have very different needs to a project manager in that company.
It’s also important to consider what the primary function of the car will be. If the car is for marketing purposes it will be a different kind of car to one which has more practical uses.
If you car will be owned by the business, it can be written off as a business expense. There are few tax advantages from having the car in your own name. Added to that, insurance coverage is generally cheaper for a business as opposed to an individual.
As a company-owned car, the operating costs of that car are deductible. In 2019, taxpayers could claim 58c for every mile driven for business purposes in a company car. If you use the company car for personal use, you cannot deduct those expenses. So, for example, it would be possible to deduct the costs of travelling to a business meeting in your company car. If, on the other hand, you drove for a session of Solarium spray tanning, that would not be deductible unless your tanned image was important to the running of your business.
The biggest advantage that company cars have is depreciation. If a company car is used exclusively for business purposes, there are significant depreciation bonuses.