Buying a business car has many advantages, from logistics and tax benefits to image and comfort. There are a few ways to go about buying a car, so generally, it comes down to being cost-efficient. Depreciation, interest payments, maintenance, road tax, and insurance are all costs you have to consider. Let’s talk more about buying a vehicle for your business.
Whilst traditional business car financing has notoriously high-interest rates, business equipment financing can be a suitable alternative. With this, the car acts as collateral, which makes it cheaper than unsecured financing, and the car is yours from the outset.
Business car loans are common because the price of a new car can be substantial. It is important to consider your situation carefully, particularly in regards to lockdowns and working from home, to assess if a car will be necessary for theiy long run. Perhaps face-to-face meetings with clients will be redundant soon in your industry, meaning you won’t need to travel as much?
If you decide that getting a car is the right choice, then the next step is deciding which car is right for you.
Here Are 5 Tips For Finding The Right Car For Your Business
There are many ways your car choice can impact your finances, but the most prevalent one is its fuel efficiency. How many miles to the gallon the car gets will directly translate to your cash flow. Spending a bit more on an economy car can often end up cheaper in the long run, though this is a calculation you should make with each scenario.
Additionally, economical cars are cheaper to insure and have cheaper road tax. In the UK there is zero road tax on electric cars, and a similar situation exists in the US although law changes are ongoing. In fact, there are also subsidiaries and tax credits for electric cars.
Opting for an electric car, or one that has a reputation for being economical can be a good opportunity to extend your green business operations into the finer details. Being a low-emission company comes with fantastic marketing benefits too, which will be evident from the car you and your employees drive.
This isn’t to say the image is the most important thing here. Businesses are the most destructive thing for the environment, and laws will soon change to enforce electric cars. This is a good way to get ahead of the curve and future-proof your fleet.
Appearance may not seem to immediately affect your bottom line, but company branding and an image is a big deal. If your company has strong branding with a certain color scheme, then it makes sense to opt for a car that’s in line with this branding. This can be a “free” way to passively advertise when driving around. Additionally, a traditional company may want a traditional car or something that appeals to the demographic of customers and clients.
Buying brand new from a garage has the benefit of a service agreement and a warranty, which is important. However, different car models still have varying levels of reliability – ideally, you want maintenance costs to be low and the likelihood of breaking down to be very low.
Lexus, Mitsubishi, Toyota, and Mini come out on top for the most reliable brands. Japanese cars are notoriously well made, whilst Land Rovers, Porsche, Jaguar, and many German car brands surprisingly have the lowest reliability scores.
Lease Or Buy?
As mentioned earlier, this decision is a big one. Leasing benefits include having maintenance, repairs, roadside assistance, and tire replacements all built into the one monthly fee. Thus, it is not your responsibility because you do not own the car. Furthermore, you also avoid depreciation and interest fees. However, you do not own or keep the car at the end of the contract, whereas buying a car outright can mean having the car for many more years.
Also, mileage becomes an issue when leasing. If you’re expecting high annual mileage you will either pay more or be rejected entirely. It is also a greater hindrance to future cash flow because of the monthly payments. Vehicle finance however can be negotiated into different term lengths and has an end date. List prices can be better negotiated when buying too, and having the car as an asset can mean it can be used as future collateral to negotiate future financing.
Business Equipment Financing
Business equipment financing is a way to get a loan for between 80% and 100% of the equipment’s value. Such equipment may be machinery, vehicles, computing hardware, and so on. How this differs from other forms of loans and vehicle financing is that the equipment (car) in question is heavily involved in the terms of the loan.
With equipment financing, you cannot dispose of the equipment until it’s paid off, and the equipment itself becomes collateral for the loan. However, because of this, it’s often cheaper than other forms of financing and it’s often a lot faster, too.
Lenders tend to operate online and are very quick to issue a verdict and fund the money. Such loan calculators are available to weigh up the ongoing cost of the loan, which should be compared with the lease option. It’s important to remember that the depreciation of the car when owned can be reported as an expense, and thus reduces taxable income.