Are you thinking of buying a company car? In that case, you’ve come to the right place. We understand your motivation. Every business owner reaches a point when using the family car just doesn’t feel right anymore. And that’s a good thing. It means you’re making progress and on your way to success.
No matter what sector you work in, the car you drive says something about your business, and when you’re meeting with potential investors or clients, you want to do everything you can to put yourself in a good light and start off on the right foot… or the right car. You might have amazing persuasion skills, but if you turn up to an important meeting in an old beat-up car, even the most eager clients might have some doubts.
We know that as the committed entrepreneur that you are, you’d pour your heart and soul into your business. And not just your heart and soul, you’d go to extraordinary lengths to save money so you can use it to grow your business. You’d sell your car and ride a bike if that’s what it took. And then there’s the opposite strategy that you might be familiar with. Some startup founders create buzz around their brand by using luxury cars to stand out in the crowd. Maybe they only need them to drive back and forth to work, but that doesn’t matter. The whole point is to be seen in them and profit from the confidence this inspires.
A major advantage of buying a car through your company is that even if you’re planning to also use it as a personal car, it will still be cheaper because you can write off part of the cost. If you intend to buy several small cars for your company’s representatives, you’ll save on insurance cost. Moreover, it will have a positive impact on your company’s image. If your representatives turn up to meetings in old beat-up cars, it will also hurt your chances of persuading investors or clients to do business with you.
That being said, a company car can be a significant expense for a small business which has to operate on a tight budget. Luckily, there are always solutions. It’s a big market with hundreds of options for any budget, and in this article, we will show you how the get the right car for your business.
Discuss Your Plans with Your Accountant
Before you start visiting car dealerships, you’ll want to discuss your plans with your accountant since they’ll be in the best position to help you figure out your budget. Without a clear idea of what you can afford, you might get carried away and turn an asset into a liability. You accountant can also explain the tax implications and what write-offs apply to your purchase.
As we already mentioned, when you buy a car through your company, you can deduct some of the cost but bear in mind that this means only business-related costs. Still, there are some major advantages. For example, the interest you would pay on a loan can be deducted, and it’s also possible to get depreciation bonuses. Depreciation bonuses carry a lot of weight when deciding between buying a new or used car. Furthermore, new cars come with more rebates and incentives from the manufacturers.
You also have the option of leasing a car which would mean you can declare the lease payment as operational expenses from the very beginning. You won’t have to wait until you can reclaim the money you spent. Of course, having a predictable payment each month with zero worries about car maintenance and repairs makes calculating your budget much easier.
On the other hand, leasing comes with some restrictions. You don’t actually own the car, so the leasing company will give you a set of rules on how you can use it. Also, since you don’t own the car, it’s not an asset. You can, however, buy it at the end of the lease, but this will usually cost more than if you bought it upfront.
Then there’s capital lease, which means you’ll partially own the car and purchase it in full at the end of your lease. In term of taxes, this means you can deduct the lease payments and depreciation.
Whatever you decide after discussing these options with your accountant, always check the fine print for hidden fees before you sign a contract.
Be Clear About the Purpose of the Car
The deductions will depend on whether you use the vehicle for corporate or personal use. If you’re buying a company car so your employees will use it when meeting with clients or run business-related errands, you’ll want to opt for something compact, easy to get around in and with good gas mileage. Note that you can also track miles for tax deductions.
The type of car you should get depends on what you need it for. Maybe you want to impress potential business partners or clients, but you might also need company cars for practical purposes like making deliveries.
Tax deductions can also depend on the type of car you get, so once again, you’ll need to check with your accountant for the specifics.
Once you’ve decided on a budget, the car’s purpose, and you’re clear on the tax implications, you’ll want to fit the kind of car you want to get to what’s expected in your business sector. For example, if you’re in the environmental sector, showing up to meetings in a Range Rover or a Hummer might not be the best idea since it goes against what your clients expect. This might lead them to doubt the sincerity of your commitment and how genuine and trustworthy you are as a person.
On the other hand, if your company operates in the construction sector, a powerful truck or SUV is not surprising.
Then it’s up to you to decide if you want to opt for something more unassuming because you want to fly under the radar and simply get from point A to B while remaining presentable, or you’d prefer to get something sleek and flashy that might help you draw in high-end clients.