While undoubtedly one of the most expensive assets you’ll buy in the early stages of growth, a vehicle can provide an incredible amount of value to your business. In industries such as plumbing, retail, shipping or even real estate, a set of wheels is an absolute must, whether it’s to deliver products, transport employees or get clients from A to B.
Many business owners also choose to purchase their personal vehicles through their company. Regardless of why you need one, there are a number of factors that need to be carefully considered in order to ensure that you’re making a wise financial decision. In doing so, you’ll be able to get the most out of your purchase. Read on to learn more.
Used or New
Given the eventual mileage and wear, the vehicles you’ll be using for your business will be especially prone to depreciation. Buying a new vehicle should only really be considered if you’re using a financing method where you don’t become the owner, as you’ll otherwise be left trying to sell an asset for much less than what you originally paid.
If you’re buying a used vehicle, take some time to determine its book value to ensure that you’re not overpaying. Have the vehicle thoroughly inspected for mechanical issues and if any are found, you should negotiate a lower price. Also, keep in mind that dealers are required by law to provide proof that the vehicle passed emissions and safety inspections.
If you can do it without affecting your cash flow, then buying a vehicle outright will naturally be the most cost-effective way forward. However, this is a luxury that few can afford, so it’s worth exploring what financing methods are available. Leasing is aN option, as you may be entitled to tax deductions that significantly reduce the overall cost.
An increasingly popular option is to obtain a small business auto loan. These are specialized loans that are more accessible than similar alternatives, namely because you can obtain one even if your FICO score doesn’t exceed 800. For an idea of what a small business auto loan entails, head over to advancepointcap.com to get a quick quote.
If the employee who will be driving your vehicle has a poor record, it could affect your insurance rates, as well as overall liability exposure and costs. Keep this in mind when handling the insurance aspect of your vehicle purchase.
Business tax laws can be tricky to navigate but understanding how buying a vehicle will affect your tax payments can go a long way in saving you money. Your best bet would be to consult an accountant who can help you understand the tax implications that come with your purchase.
This includes whether the interest paid on an auto loan is deductible, whether you need to keep mileage records, which vehicle-related expenses can be deducted, and whether the purchase is a one-time deduction or it requires depreciation over several years.
Take some time to finalize your purchase decision. The more carefully it’s considered, the more likely you are to make a good investment.