Some businesses rely on transportation more than others. For those who only need to drive to the nearest trade show once or twice a year, a dedicated company vehicle probably isn’t worth the expense. However, if you or members of your team regularly go out into the community, it can be a great way to save money and provide you with peace of mind.
That doesn’t mean deciding to use a business vehicle is fast or easy. There are plenty of things you need to consider before buying a dedicated car for business.
Who’s Going to Be Driving the Vehicle?
Before you do anything else, think carefully about who is going to be driving the vehicle. If you’re a small operation and you’re the only one who will be driving, you may simply want to use your personal vehicle as a business vehicle during business hours.
If other people will be driving the car, you’ll need a dedicated vehicle, and you’ll want to make sure they know what they’re doing behind the wheel.
Test their knowledge by asking them to take a free online test with ePermitTest , or ask them to update their license classification so they are required to pass a driving test before driving the vehicle.
Not only will choosing the right people to drive your vehicle provide you with peace of mind, it can help keep insurance costs down.
Understand How It Will Impact Taxes
Having a company vehicle can greatly alter your tax situation. It’s important to know useful tax tips so you can use them to your advantage all year long.
For example, there are many things you can deduct that include:
Mileage when doing job-related driving
Transportation expenses, like parking and tolls
Repair and maintenance costs
Washing the car can sometimes be deducted
Health-related travel expenses can sometimes be deducted
It is important to understand what you can and cannot deduct. For example, you can’t deduct commuting expenses, even if you carpool with other employees. It’s also a must to keep meticulous records for everything you deduct. That way, you’re prepared in the event of an audit.
Understand How It Impacts Financial Statements
Not only does using a vehicle for work impact your taxes, it also impacts your financial statements .
Financial statements show all the assets that are owned by the business. If you personally own your vehicle, even if you use it for business, it won't be listed.
If instead you purchase a vehicle with the sole purpose of using it for business, it will have to be included in financial statements. That means its costs, accumulated depreciation, and liability will need to be outlined in detail.
It’s important to weigh the need for a business-only vehicle with the amount of time and effort it will take to outline that vehicle in your financial statements.
Decide If You Will Lease or Buy
There are pros and cons of buying versus leasing a vehicle . Leasing a vehicle often means you can get a higher quality vehicle for less, and it’s easy to trade in the vehicle for a new one at the end of your lease. However, mileage is limited, and you won’t own the vehicle, which means it isn’t an asset to your business.
The biggest consideration is how leasing or buying will affect your taxes. Payments on a leased vehicle are usually fully deductible, which can be a huge tax advantage. It’s important to figure out which strategy is best for your business before driving a car off the lot.
Prepare Ahead of Time for Emergencies and Accidents
Using a business vehicle can be extremely convenient. That is, until you need a repair.
Whether for business or personal use, everyone who owns a vehicle should prepare for auto maintenance and repairs . That includes saving money in an account to make repairs when they’re needed, and documenting the repairs in-depth if they will be included on your taxes.
It also includes figuring out how you’re going to deal with an emergency when it arises. For example, if the tire blows out on the way to an important trade show, do you have another vehicle you can use in the meantime?
A business vehicle can be a huge asset to your company, but only if you think carefully about how it will affect you, your employees, and your bottom line. Take the time to consider the topics on this list carefully and you and feel good knowing you made the right decision for your business.