How to Find the Right Car for Business Use
When your business reaches the point where it is necessary to take to the road, you want to be sure you find the right car for your uses. You may need a car to haul deliveries across the city, a car to keep supplies and travel to customers in, or a versatile 4-door sedan to simply get from your business to the next opportunity.
There are tax incentives and other incentives meant to help your business take to the road, but it is important to know exactly what your business needs before purchasing a company vehicle. This short guide will help show you what to consider while looking, what tax incentives you can take advantage of, and how to find the perfect car for your business’ needs.
Consider Your Business Needs
The first and most important part of the process of buying a car for your business is taking note of what exactly you need a vehicle for. Think about what your needs are and how a car can help to fill them.
For example, if you are a small business in the service industry, a car owned by the business would be helpful for picking up ingredients midday, giving employees another way to get home, or for establishing a new catering service in the restaurant. As such, it would be useful to have a large rear storage space, for food service and for storage.
If you are a small office-based business or something along these same lines, a company car can be useful for meeting with clients, tracking miles driven for business purposes for reimbursement, and can be a mode of transportation for a sales team. As such, a large boxy car wouldn’t leave much of an impression on others, and you may want to opt for something a little more practical for simple driving.
Analyze exactly what your business needs a company car for. They can be a huge investment, but if it aids your business and provides what you need, it will be a worthwhile one.
Important Questions to Ask
One important question to ask is whether you want to lease or own your business car. Owning a car can save you money in the long run, with a large up-front payment, whereas leasing will allow you to comparatively save a little more each year but can cost more over time. Another major difference is that there are different taxes that apply to leased or purchased cars. Purchased cars may be subject to an excise tax but electric cars can be eligible for a tax deduction, for example, while leased cars can have large deductions but only if it is used entirely for business and nothing else.
Another important question to ask before leasing or purchasing a vehicle for business is whether you truly need to get a new car, or if you can simply use your personal vehicle. A personal vehicle can be converted to a business vehicle if at least 50% of its time on the road is for business use, for example. Using a personal vehicle can save a lot on both initial investment and long-term costs but can be tedious to use for both business and personal use.
The final important question you must ask yourself is if you have decided to purchase a company car, whether you need it to be totally new or if you can buy it used. Used cars are always a better option for purchases but be sure to get the car inspected before you get too far along the car buying process.
Tax Incentives and Advantages for Company Cars
There are lots of tax incentives are available for purchased, leased, and converted business cars and could be the deciding factor behind your final decision.
No matter what car you use, you can receive a tax deduction for the use of alternative energy or electricity to power your car. The government encourages businesses to consider using electric cars due to their environmental friendliness by offering this deduction, so see if it could help switch your car’s power source from gasoline to electricity. Hybrid cars used to receive a deduction, but now it is different from state to state.
Whether you purchased, leased, or converted a car, you can also claim a certain percent of mileage, but leased cars may have a maximum mileage you cannot go over.
For a car you purchase, there are depreciation deductions that become available as your car devalues over time. This can be done regularly and should be kept track of in the event that you want to trade in your car for an upgraded vehicle.
For a car you lease, if it is used 100% for business, you can write off 100% of the monthly lease payment, which includes gas and some maintenance. If you only use it partially for business, these deductions are lessened but are still available.
