Whether you or your employees are traveling a lot for work or making deliveries, putting miles on your personal car can get expensive, both in fuel and in overall wear and tear. If you’ve reached the point where you want or need to get a company car, you might find yourself intimidated by all the options available to you. What do you need to know about buying a company car and what can you do to make sure that your chosen vehicle lasts as long as possible?
Option One: Buy
Your first option when deciding to add a company car to your assets is to buy it outright. This is the most expensive option, but it does give you some options to recoup some of your expenditures in the form of tax breaks and write-offs. When you purchase a vehicle, you have to make a decision — you can either write off the actual costs of the vehicle or write off your mileage as a business expense. You can’t do both, and the choice you make will last for the life of the vehicle.
The positive side of owning your company car is that you aren’t limited by mileage or usage restrictions. You can drive it as much as you need to, upgrade it as you see fit, and paint or add your logo without violating the conditions of your lease or financing agreement. It’s yours, for better or worse, and you can do with it as you see fit. If you’re planning to remotely track mileage or speed with GPS upgrades and you have the available funds, this is going to be one of the best choices for you.
Option Two: Lease
Your second option is to lease your new company vehicle. This option is popular for small companies that might not have the working capital available to purchase a vehicle outright. The nice thing about leasing a vehicle is that you have monthly payments, expenditures that you can immediately write off as operating expenses, so while you’re spending money, you can recoup some of the costs. You can also claim any interest you pay on your lease as a tax deduction in many cases, saving you even more money in the long run.
The downside of leasing a company car is that you are limited in what you can do with it. You can’t affix any permanent signage to the exterior and you may only be allowed to drive it for a certain number of miles every year before you violate the leasing agreement or have to pay an expensive fee.
Option Three: Finance
Your final option when choosing a company car is to finance the purchase. This can be a great option if you need a company vehicle but — for whatever reason — you’re having trouble gathering the money needed to make the purchase. Financing is also an option if you have poor credit can’t qualify for a lease. This shouldn’t be your first choice, but if you’re in a pinch, financing could be the difference between getting the company car you need and putting more miles on your personal vehicle.
You can find some good deals when financing if you’re willing to do a bit of research to help you find the best lender to work with. Don’t sign up with the first company that crosses your path, and for the love of whatever you consider holy, read all the fine print.
Other Costs to Consider
Once you’ve got the keys to your company car, there are other expenses and costs to consider. According to the IRS, the total cost of operating a company vehicle is equal to about $0.54 per mile or around $8,152 a year on top of the money that you’re spending to purchase, lease, or finance it. That includes things like fuel, maintenance, insurance, and unexpected expenses like repairs or bodywork after an accident.
If you’re budgeting to add a company car to your business assets, make sure you’re including these expenses. Many of them can be written off as operational costs. If you purchase your vehicle, you’re responsible for all maintenance and repair costs, while if you lease, some of those expenses might be covered by a warranty.
Increasing The Car’s Lifespan
Even if you have the funds available to purchase a new company car on a moment’s notice, ideally you want to make this investment last as long as possible. What can you do to increase your vehicle’s lifespan, even if it’s being driven daily? The average life expectancy for new vehicles is 12 years or 200,000 miles, but new technology is increasing this number every year. The Tesla Model S is expected to run for upwards of 600,000 miles.
You can increase your car’s lifespan by keeping up its maintenance schedule and repairing any breakdowns that happen as quickly and professionally as possible. If you reach a point where your vehicle requires major repairs — and we’re talking thousands of dollars worth of repairs, perhaps even more than you paid for the original purchase — or it’s bleeding money, it might be time to replace it.
Whether or not you need a company car is dependent on a lot of variables, from your credit and available spending money, to whether you need a vehicle that you can use as a tax deduction and everything in between. Thankfully, purchasing a new car outright — while an option — isn’t the only way to get your hands on a company car. Take a look at your business and your available options and use that information to determine which choice will be the best one for you.
A company car can help you get from point A to point B without putting miles or wear and tear on your personal vehicle. Don’t spend your money at the first car lot that crosses your path. Do your research and find some lenders or companies that align with your company values and are willing to work with you to find the best company car for your needs.