Nearly 100 percent of employees prefer using company-provided cars than their own, according to GE Capital Fleet Services. If you’re keen to purchase a vehicle for your business, your employees will likely be excited to use it. But shopping for a company car can be stressful. A study conducted by Sewells Research & Insight found that while 42 percent of people look forward to researching company car options, only 34 percent enjoy the actual process, which includes visiting dealerships and test driving vehicles. To make the process smoother and more enjoyable, here are some questions to ask yourself.
Should You Get An Auto Loan?
When considering buying a company vehicle, your first thought is probably: how will I finance it? One method is to get an auto loan. This allows you to purchase the car under your, or your business, name, and then pay fixed monthly payments for it. Many places offer auto loans, such as credit unions, banks, and dealerships – but be ready to make a down payment of up to 20 percent. Auto loans can come in handy for business vehicles if your goal is to purchase more than one car as your business grows because a fleet purchase will help you cut costs. By applying for a fleet number from the car manufacturer, you can get various discounts that are exclusive to qualified fleets. These can save you hundreds or thousands of dollars per vehicle.
Should You Get A Lease Or Buy?
Almost 29 percent of new cars sold in the U.S. in the fourth quarter of 2017 were purchased on lease, according to research on Statista. Purchasing a business car on a lease offers you tax cuts. When you don’t use the standard mileage rate, you can deduct the company car’s full monthly lease payment amount if the car is solely used for business purposes. However, sometimes owning the company car is more sensible than leasing it. If you prefer the idea of owning the vehicle and being fully in control of it, or you want to be eligible for the vehicle’s depreciation deduction that you can’t make use of if you lease, then buying the car is probably a better idea. In this case, you should go online to research cars in your area so that you can secure a company vehicle that works with your budget.
Should The Vehicle Be Business-Owned?
It’s worth putting the company car in your business name because this offers you many benefits. These include being able to deduct interest on a car loan because use of the car is viewed as a necessary business expense. However, the insurance you take out on a company-owned car tends to be more expensive than that of personal car insurance. This is because the driver, such as your employee, will probably use the car more and notch up more miles. There is also a greater risk of accidents due to situations such as heavy traffic or traveling on roads that are unfamiliar to the driver. These experiences increase the chance of having to submit a claim to the insurance company. However, putting the car in your business name will enable you to get federal tax deductions for various vehicle expenses. These include fuel, tolls, repairs, and depreciation costs. To find out what your deduction will be, multiply the car’s yearly mileage by the IRS’s standard mileage rate (which they determine every year and which you can find on the IRS website).
There are many important factors to consider before buying a company car. These include the options of leasing versus purchasing, as well as whether it makes sense for you to purchase the car in your business name. By considering the points in this article, you’ll be better equipped to move forward and purchase a vehicle that brings more business to your company.