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If you need to drive around a lot for your work, and most of your time on the road is on company time, then it’s a good idea to make use of a company car, rather than your own. A company car is not only an enviable perk, it may well be a vital tool for your job and, as such, it should be treated with the same consideration for costs and returns on investment as every other piece of business equipment. As such, we’re going to look at how you find a way to better fit the company car within the business’s finances.
Take the time to work out what your business can afford
When you’re choosing a company car to buy, it’s only natural that you’re going to want to pick a car that’s comfortable, runs well, and looks good, as this reflects the prestige of the business. However, you also need to make sure that it fits well within your finances. As such, go over the money that you have available and, using your accounting software, try putting in the estimated costs of your car. Don’t just account for the initial cost of purchase, but use a calculator to work out the costs of ownership, and ensure that your finances can bear it before making any decisions.
Choose a lease that works for you
Of course, buying isn’t always the option that you might want to go with when it comes to your company car. Leasing a company car offers several advantages. Firstly, it provides flexibility, allowing businesses to access newer models without committing to ownership. Leasing also typically requires lower upfront costs compared to purchasing outright, preserving capital for other investments. Additionally, lease payments are often tax-deductible, reducing the overall tax burden for the business. Maintenance and repair costs can be included in the lease agreement, simplifying budgeting and eliminating unexpected expenses. Moreover, leasing ensures access to reliable transportation, enhancing productivity and professionalism. Finally, at the end of the lease term, businesses can easily upgrade to newer models, staying competitive in their industry.
Thinking about your financing options
Selecting the right financing loan for a company car is crucial for maximizing financial efficiency. Businesses should consider various factors, such as interest rates, repayment terms, and down payment requirements. Comparing offers from multiple lenders allows for finding the most favorable terms tailored to the company’s budget and cash flow. Flexible repayment schedules can help align payments with revenue streams, reducing financial strain. Additionally, examining the total cost of the loan, including interest and fees, ensures transparency and prevents unexpected expenses. Furthermore, assessing the lender’s reputation for customer service and reliability is essential for a smooth borrowing experience. Ultimately, choosing a financing loan that offers competitive rates, flexible terms, and reputable service providers empowers businesses to acquire company cars while minimizing financial risk and optimizing long-term savings.
Be mindful of your fuel costs
When you’re choosing a car, fuel economy should be one of the factors at the forefront of your mind. Make sure that you choose a car that offers decent fuel economy based on the environment you’re most likely to spend your time driving it, be it in the city or out on the highway. Beyond that, you might want to look into where you can buy your fuel more economically depending on your needs. If you know you’re going to be driving a lot, then buying fuel cards can be a better way to buy your fuel than to pay whatever it costs at the pump when you make a stop.
Take care of your car
The other major recurring cost that you have the most control over is the cost of maintenance and repairs. The more that you’re able to put into maintaining your car and taking care of it yourself, the less that you’re going to have to pay a mechanic for repairs. Make sure that you’re having your car inspected on a regular basis so that you can spot any issues before they take you off the road. The sooner that you identify a problem with the car, the less it’s likely to cost you, after all. If you have a fleet of vehicles, it’s a good idea to train every driver to maintain and inspect their own car.
Make sure that you’re accounting for it in your taxes
As you may well know, a lot of the money that you spend for the benefit of the business can be claimed off of the taxes that you have to pay. The same goes for your company car. Now, you want to make sure that your car is registered to your company and not you, personally, as a mileage deduction for S corporations can only be made on assets belonging to the company. Aside from mileage, you may be able to claim deductions on repairs, maintenance, insurance, registration, tolls, and even deprecation that affects the value of the asset over time. As such, you could end up taking a significant chunk off your taxes.
Keep personal use to a minimum
As mentioned, your company car should be for the benefit of your role within the business as much as possible. Not only so that you can claim as much as you can from it on your taxes, as we went over, but in order to make sure that you’re able to keep its related expenses clearly separated from your personal life. Commuting to and from your place of work doesn’t count as personal use, in most cases, but you should make sure that when you’re driving to meet personal needs, you’re making use of your own vehicle. You might even want to keep your company in company parking to avoid the temptation of taking it out for your own needs.
A company car can greatly help you in your role, but you want to make sure that it makes sense with your business finances, as well. Hopefully, the tips above help you do that.
