You pondered the age-old question of buying vs leasing. In the end, you decided that buying a vehicle for your small business makes more sense than leasing. Making monthly payments perpetually for a company vehicle you'll never own doesn't sound very exciting.
But you should keep in mind a few critical considerations before driving out to the dealership. Hopefully, this post sheds some light on what factors to focus on.
Buying a Business Vehicle for your Small Business….
…..is an enormous investment. And it can have a huge impact on your cash flow. Before signing the auto loan paperwork, ensure you really need the asset. In addition, make sure your cash flow can accommodate the monthly payments.
But how do I know it's time to buy a car, truck, or bus for my business? If your car and those of your employees are taking substantial driving for business purposes, it's about time.
First Things First; Can You Afford it?
As a small business, you likely are watching every penny your business rakes in. If you're like most small business owners, you don't want or can't afford to buy cash. In most cases, getting an auto loan from the bank is the best way to finance the purchase.
Typically, the down payment hovers between 10 and 20 percent, according to Credit Karma. However, the bank may demand a higher down payment if your credit needs a bit of work.
What if you have a terrible credit score?
Leasing is the next best thing. Not only will you pay lower monthly payments, but you'll also fork over a lower down payment. In fact, there are many reasons to lease rather than buy.
Wilmar offers every kind of vehicle you'll ever need for business use. Contact us now and have us customize a lease program that makes sense for your business.
Know the Right Time to Buy
Car dealerships always seem to have tantalizing deals. But if you crave a hard-to-walk-away-from deal, buy the business vehicle in December or January.
Another great time to buy is when the economy is performing dismally. In an economy like that, fewer people visit dealerships. Naturally, car dealers strongly feel the need to act and jumpstart revenue generation.
One way to pull in new customers is to cut sticker prices. That being said, it's not smart to grab the deal if your revenue numbers are horribly bad.
Business Car Insurance
You likely have the Business Owners Policy (BOP). Unfortunately, this insurance doesn't cover your company's vehicles. So, you'll have to arrange a separate insurance policy or policies for the vehicle(s).
According to Insurance Information Institute, the type of coverage(s) you need depends on a number of factors. For example, will you drive the vehicle yourself or will an employee drive it? Does your state require you to buy specific types of coverage?
The vast majority of states need you to buy liability insurance. Also, some states may require you to buy PIP (personal Injury Protection), also known as uninsured or underinsured motorists coverage. In addition, your vehicle itself also needs coverage. If you're going for bank financing, you'll likely buy physical damage cover for the asset.
It's critical to look around before buying insurance from any one company or dealer. Request quotes from several carriers. Resist the temptation to go with the first company or insurance dealer you find. Do your research. Grab the best deal offered.
Go for Good Fuel Economy
Most fuel guzzlers look stunning. They sure can help you convey a certain image for your business. However, unless you're in a business where appearance matters more than actual service delivery, avoid such vehicles.
You're an entrepreneur. If you don't keep an eye on cash flow, your expenses will! Small expenses such as gasoline costs can add up to substantial amounts over time. That's why you should check out a few mpg calculators online. No business owner wants to end up with a vehicle that decimates cash flow and profits.
One way to manage fuel costs is to give fuel cards to your drivers. We offer a fuel card that lets you gas up at over 180,000 locations across the U.S. It's convenient, and tracking your fueling costs will be a breeze for you.
Taxation for Business Vehicles
Taxation for business vehicles isn't always straightforward. It's vital to have a go-to accountant for advice on these issues. You'd not claim depreciation for a 13,000-lbs SUV the same way you would for a smaller, lighter car. Want an electric-powered vehicle from Tesla or GM?
You likely should claim federal tax credit. And will you deduct IRS-set mileage at 58 cent per mile or will you deduct the actual expenses? See, it's imperative to consult a knowledgeable accountant on these issues.
Final Thoughts
Buying a vehicle for your small business isn't exactly rocket science. But you must be careful, or you'll make costly mistakes. First off, consider whether you can afford the monthly payments. In addition, pay adequate attention to insurance issues. Fuel consumption is also a critical consideration. And knowing when to buy can save you money.
Once you build your fleet, you'll likely need a bit of help with management. And that's where our expertise comes into play. Contact us now.
