As a business owner, you need reliable transportation that will also portray the image you want your clients and prospects to observe. Marketing and advertising your services and products won’t get you very far if you show up to appointments in a beat-up vehicle that can turn off prospective buyers. There are a few buying points you should keep in mind when purchasing for your business versus personal use, though. Here, we’ve put together a list of things to consider when it’s time for a new ride:
1. Consider Tax Implications and Write-Offs
Before you even begin to search for a new business vehicle, talk to your accountant about how to purchase it for the best tax outcome for you. Depending upon income and deductions you are already taking, buying a used car may make more sense, or you may want to pay cash or lease the vehicle instead of financing it. Tax professionals can further explain whether you want to write off the entire purchase price or do it incrementally over time, but the IRS has limits on these deductions if your adjusted gross income isn’t high enough yet.
2. Consider the Image You Want to Portray
Once you have a budget in mind and know whether you need to look at used or new vehicles, decide what type of image you want your business to portray when on the road. Do you need something understated, or do you cater to higher-end clientele who would rather see a more expensive model? If you cater to the working class, a premium model may turn prospects off and make you seem too flashy for them. Keep it simple and make sure the models you look at will shed a positive light on your business.
3. Consider Gas Mileage and Maintenance Costs
If you are considering multiple models and can’t decide based on price and financing options, consider gas mileage and maintenance costs. These are the true ongoing costs you will always have, so just because the price tag might be identical between two models, one of them is likely going to cost more to drive. Estimate gas, oil changes, repairs and even tire costs for each model.
4. Consider Your Personal Use of the Vehicle
Will this vehicle also be used for personal use? If so, you need to consider what type of vehicle you really need. This will also affect the amount of the purchase that can be written off on your taxes, and be impacted by whether employees will be driving business vehicles. If you lease a vehicle and allow an employee to drive it, you can’t keep mileage in check very easily. Purchasing vehicles for employees to drive makes much more sense so you don’t have mileage limits to stay within.
5. Consider the Function of the Vehicle for Your Business
Do you simply need to buy the vehicle for trade shows and visiting clients? Or, do you frequently haul equipment and employees as well? For example, a personal trainer with higher-income clients will need something much different than a contractor who needs to haul trailers and tools to the job. If you show up for a remodeling job in a Mini Cooper, your clients are going to wonder if they hired the right person for the job.
6. Consider Warranties and Car History
If you’re looking at buying a used vehicle, make sure you get a vehicle history report to warn you of any issues the vehicle may have. Prior accidents, floods and other damage are listed on these reports and the price should reflect what they tell you. This may push you to look at a new model simply for the manufacturer’s warranty and guarantee that whether a car is a lemon or not, but your budget will determine this fact.
7. Consider Who Will Own the Vehicle
If you’re buying the new business vehicle and will be writing off costs and expenses as business expenses, consider the fact you need to title it in your business’s name. If you title it in your personal name, tax advantages may not be as great. Also remember that covering the vehicle under your business insurance policy will likely cost less than a personal policy. Interest on vehicle loans is not deductible as a personal expense, either. However, a business is able to deduct those expenses as well as maintenance, gas and even new tires. Furthermore, if your business already has credit, you can finance it with your business and avoid any effect to your personal credit report.
Buying a vehicle for your business is something you’ll need to address every few years, depending upon the amount of use your vehicles get for business purposes. Remember that in addition to getting a vehicle that will project your image, it needs to fit your financial plan for taxes and depreciation, as well as ongoing maintenance costs your business will be absorbing. Vehicles are necessary but costs can also get out of control easily if you don’t stick with a buying plan.