You have a business, and you’re starting to rack up some travel miles. However, you are unsure if you should buy a company car. Would it benefit you, or would it be an expense that drains your account? There are some factors to consider, but the benefits of owning a company car can be significant.
Do You Need a Company Car?
Before you take the leap, crunch the numbers. Add up operating expenses, including:
- Fuel and maintenance
- Advertising on vehicle exterior (wrapping or painting)
- Repairs
- Loan payments
You can use a car loan calculator to help you determine what your upfront cost will be for a new vehicle. Consider different makes, models and years to fit your budget.
Once you’ve determined a company vehicle is a good fit, check out the benefits owning one provides for your business.
1. Travel and Convenience Benefits for Employees and Customers
Do you meet clients regularly to conduct business? Do you often travel to them rather than meet them in your conference room or office? If so, owning a company vehicle can greatly benefit your company, customers and employees.
Having a vehicle with your logo is an excellent mobile advertising strategy. Your company’s branding is visible anytime an employee drives it for work appointments or errands.
Your employees can appreciate driving a company car instead of putting miles on their vehicles. It can also make tracking expenses easier, too — no more mileage reimbursement reports for employees to fill out for their personal cars. Regarding customer benefits, clients may like the convenience you provide when you meet them at their location.
2. Tax Benefits
The IRS provides tax deductions for company vehicles, so buying a car for your business can possibly save you money. Companies can take deductions for expenses such as:
- Fuel
- Regular maintenance, such as tire replacement and oil changes
- Parking fees and tolls
- Insurance
This deduction method is called the actual expense method. If you decide to use this strategy, be sure you and your drivers keep accurate records of all expenses. The government may ask you to substantiate your activities. Also, if you use the car for personal reasons, keep records of those trips.
As an alternative, companies can use the standard mileage rate to deduct expenses.
Another tax benefit is depreciation. There are a couple of methods of deducting for depreciation. Check with your tax advisor to see if your vehicle qualifies and which method is best for your company. Note that this tax benefit applies to purchasing a car rather than leasing it.
3. Insurance Benefits
You may be able to get a better auto insurance rate for a company car than a personal vehicle, so there are potential money-saving benefits for your business. Also, there’s always the possibility that you or an employee can be involved in an accident while driving the business vehicle. Hopefully, that will never happen. If it does, though, you should be able to avoid any personal liability as long as your business auto insurance is adequate.
Basic commercial auto insurance should cover the following:
- Liability
- Comprehensive coverage
- Uninsured or underinsured motorist coverage
- Collision coverage
- Medical payment and personal liability
You may need additional coverage depending on your industry. If you pull rented trailers, for example, you may consider trailer interchange coverage.
If you’ve done the math and decided buying a company car or refinancing your auto loan from another lender, is a good business decision, calculate your auto loan options and take your time choosing the right vehicle. Also, be sure to keep thorough records for tax purposes while using it. Then you can reap the benefits a company vehicle provides.
