Approximately 59 percent of business owners say they need a vehicle for their business, according to a report by Ford and Manta. Investing in a vehicle for your business can bring multiple benefits for you, your employees, and your bottom line. Choosing to purchase a business vehicle instead of leasing may reduce your costs, allow you to access tax advantages, and help you achieve your overall business goals. It may also be necessary for your business to expand. However, a business vehicle is not always the best financial move for every business. When it comes down to it, if you can comfortably answer a few key questions, then you are on the right track to investing in a business vehicle.
Can Your Business Afford The Initial And Consequential Costs Of Owning A Vehicle?
Investing in a business vehicle requires much more than an initial downpayment or purchase price. You can expect to incur repeated costs including the cost of maintenance, repairs, and vehicle insurance. Also, if you plan on acquiring a business vehicle on finance, then you need to account for the costs attached to the financing method your choose. For instance, the average auto loan interest rate is 5.61percent and determined by your business credit score, loan term, and choice of lender. Then there is the cost of maintenance. A poll by Harris Poll and Ally Bank found that Americans spent $397 on vehicle maintenance annually. However, this figure would shift according to the type and reliability of motor vehicle chosen. Older vehicles may cost more to maintain or repair thanks to increased wear and tear and shortage of motor parts.
One of the best ways to assess whether your business can afford to invest in a business vehicle now and in the coming months is to look at an updated business cash flow. Are your monthly revenue streams enough to cover the additional monthly expenses that come with investing in a business vehicle? These will include lease payments (if you choose finance), salaries for additional employees, and maintenance.
Do The Benefits Of Owning Outweigh The Pros Of Leasing?
While buying a business vehicle comes with impactful benefits, it is not always the right fit for your business or at the same time. When thinking of investing in a business vehicle, consider how it fits into your business goals. Are you planning to expand your services to include delivery for your product? Alternatively, are your logistics costs rising exponentially with your third-party partners? In this case, a cost-benefit analysis will help you weigh the outlays versus the perks of owning a business vehicle. For example, owning a business vehicle may lead to reduced delivery times and allow more control of the purchase to the delivery process.
Do You Need A Specialized Business Vehicle?
Depending on what you intend to use your business vehicle for, you may need to spend more to get it customized. One good example is the use of refrigerated lorries or vans for perishable products. Not only does a specialized vehicle require more investment and lead time, but it may also reduce the residual value when you decide to sell. Finally, the versatility and tax deductions of using a business vehicle can also be influenced by the type of vehicle you choose.
Investing in a business vehicle can be a great way to propel your business forward- if it matches your business’ goals. Take the time to think about and plan for all that comes with investing in a vehicle for your business- the costs, the benefits, and the place it plays in your business overall.