Buying a car is a big thing for small businesses. One reason is because it’s usually a positive sign that the business is growing.
Transitioning from the use of personal vehicles to transport products from their source to the office or for delivering goods to consumers usually heralds growth to both your current and potential customers.
For startups, the use of a branded vehicle, for example, can help it create name recognition, even if its use is just going to and from work.
But another important reason why it’s a huge deal is because when unwisely decided on, the purchase could prove to be a burden instead of a benefit.
To avoid that, here are some things you can (and must) consider first before buying your business’ own vehicle.
Treat is an asset
A company car should be treated as an asset as in the financial sense. It is no different than the office computer or the microwave oven in the pantry. They have different functions but drive towards the same goal for your business in the end: profitability in more ways than one.
The question to answer is: Will the amount of purchasing a car or vehicle cost less than renting for deliveries or sales considering a period of time?
If you’re using your personal vehicle other considerations may include faster wear-and-tear and availability for use in your family affairs. While these may cause you current difficulties, they also help your business because it’s already your own.
At the endpoint of this decision, the computations (including fuel, insurance, maintenance) should lead to it being actually afforded by the company’s profits.
Determine the functions and possibilities
Since it is for your business, the vehicle must serve almost, if not all, of its needs.
Simply put, it’s impractical to buy a compact car for a family of six. All of you won’t fit in it, and even if you do, there’s no more space for luggage (and possibly, even breathing properly). If you also have trips to Costco or buy in bulk together and have regular family outings, that would just be unbeneficial.
So it’s best to list down all the things that a vehicle is needed for your business and what it can do. Ask yourself the following questions:
- Does it have enough space for the usual (and near future) cargo space needed?
- Does it have enough seating for the staff and clients for a comfortable experience during business trips?
As with other assets, it should serve the purpose of why it’s there. Then, after you have figured out everything that you have, then the next step would be to find the best deal on the market. (And don’t forget to ask for freebies.)
Others also recommend considering the Internal Revenue Service’s (IRS) standard mileage rates. Below are the rates issued on December 14, 2017 for the current year:
54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
- 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
- 14 cents per mile driven in service of charitable organizations.
Then, having good knowledge when it comes to depreciation or write-offs, which an article by American Express has detailed in this article.
Purchasing a car is a big thing. Just make sure to choose wisely, and in the end, buying a car will lead to it being an actual asset (as in advantage) of your company or business.