If you’re an entrepreneur, contractor or small-business owner, you likely already use your personal car for work. However, if you’re an employee, you must choose between driving your own vehicle and using one your employer offers. The decision is a bit more complicated than simply picking which one looks cooler or gets better mileage.
From insurance to record-keeping to logging miles, there are several things to consider if you’re thinking about using your personal vehicle for business purposes. Analyzing the risks and benefits before heading out can protect you and save money in the long term, so take your time and choose carefully. Here are some points to ponder.
Each time you drive your car, it experiences wear and tear, thereby decreasing its value. Tires become thin, engines burn out and fenders get dents. Over time, you’ll have to pay for maintenence, repairs and upgrades. Therefore, if you’re thinking about driving your car for business purposes, you take the depreciation and maintenence costs into account.
Luckily, many companies allow you to deduct a certain amount and receive reimbursement for general wear and tear on your personal vehicle. However, there is a limit on the deduction amount depending on the year you placed your car in service and whether or not you use it exclusively for business travel. Since these limits can vary, it’s best to speak with your manager about specifics and if they’ll cover depreciation costs.
Record-Keeping and Taxes
It’s important to keep records of business miles, gas expenses and even maintenence costs for tax and reimbursement purposes. If you don’t, you’ll have no way of knowing how many miles were personal and how many were business-related. Plus, without a proper log and evidence of business travel, you won’t be able to take a vehicle deduction when filing your taxes.
There are two ways to keep good records. The first includes logging your travel miles in a notebook or app. This year, you’ll receive 57.5 cents for each mile you drive for business use. The second way to track the cost of using your personal vehicle is to employ the actual expenses method. This process involves monitoring miles as well, but will also include keeping a tally of additional auto-related expenses like gas, oil, repairs, licenses and even parking fees.
If you were planning to explore your next business trip destination, drive around the city and claim those miles in your deduction, think again. According to the IRS — and likely your employer — personal expenses are not deductible. This means a day trip to the beach and a quick jaunt to the grocery store don’t count. Therefore, you shouldn’t log this travel as business mileage.
Moreover, the miles you drive commuting to and from the office aren’t deductible, either. Using your car to transport materials or make business calls during your daily commute doesn’t qualify, either. If you’re traveling between offices or to a remote work location, however, you may be able to log your miles and deduct them.
Nationwide, there is an average of 208 crashes for every 100 million vehicle miles. While these statistics may suggest the chances of getting in a crash are low, the risk of an accident occurring is always there. If you do happen to get into a scrape, you must exchange information, regardless of whose vehicle you’re driving. Moreover, you must adhere to company policy if you want protection and coverage.
For instance, some companies prohibit texting and phone calls while driving. By complying with this policy, you both reduce your risk of a crash and increase your chances of receiving insurance coverage. Moreover, obeying policy will provide job security in the event of a crash, whereas employees out of compliance may be subject to termination.
Speaking of insurance, it’s essential you have your own, whether you’re traveling for business or not. In most cases, doing so will cover full or partial liability costs if you are in an accident. However, your personal insurance company may not cover damages if you’re driving for work, especially if you frequently do so. In this case, you’ll want to make sure your company offers non-hired insurance. This policy would supplement your personal one if you were to crash.
Still, insurance is complex, and even a company policy may not fully cover you. At minimum monthly premiums, a non-hired policy will protect the business and provide liability coverage if someone tries to sue it in an accident. However, non-hired insurance won’t cover car collision damage and repairs. Consequently, you or your employer could be left to foot the bill. The only way to receive full or mostly-full coverage is if you drive a company car with commercial auto insurance coverage.
Benefits of Driving a Company Car
Ultimately, the decision of whether to drive your personal vehicle or a company car depends on your preferences and how big a risk you can afford to take. Which car makes you feel safer? Which one will provide more coverage and accident protection? Will you receive compensation for wear and tear and mileage if you drive your own vehicle?
If you don’t have the money for a lawsuit and would rather not worry about the logistics of driving your own car, choosing a company vehicle may be the best choice. This is especially true if it comes with commercial auto insurance. Such a policy will protect both the business and you, including bodily injuries to you and others, vehicle damage, and even theft and vandalism
Additionally, as long as you have good coverage and feel comfortable driving different vehicles, choosing a company car for business travel can be a fun — and even luxurious — experience. Of course, you probably won’t be zooming around in a Porsche or Lambo, but you’ll likely get to test out a few newer vehicles. These company cars may have features like heated seats, rearview cameras and even smart parking, making business ventures more enjoyable.