4. Prioritize necessary car features
In addition to picking the right type of vehicle, your company car should have the necessary features to allow you and other employees to do their jobs. For example, if you’re a successful realtor who often drives around your clients, investing in the latest safety features like lane-keeping assist or automatic emergency braking may be a top priority for client safety. Whatever features your business requires, make sure you prioritize the ones that help you achieve your business goals over any extras that are just nice to have.
5. Try buying used
For many small businesses, buying a new car isn’t the most affordable option. If your business values function over form, buying a used car can help you save on both the upfront costs and depreciation. It’s important to note that older cars do come with some risks, given that they’re more likely to need repairs, so it’s wise to have a trustworthy mechanic inspect the vehicle before you purchase.
6. Consider leasing
Another way to afford a company car is by leasing a vehicle. If you’re a micro business and can’t afford increased overhead costs, getting a car loan with high interest may not be the best move. With a lease, you can reap the benefits of having a business car without the high upfront cost of a down payment. Leasing also allows you access to newer car options, and provides a predictable monthly payment, and if any repairs or maintenance are needed, they’re handled by the leasing company.
You also won’t need to worry about the value of your company car depreciating to an amount below what you owe on a car loan. Although you won’t be able to deduct depreciation costs from your taxes if you don’t purchase the car, you can still get certain tax advantages, like being able to deduct your commercial lease payments.
7. Keep fuel economy in mind
Even though a company car is a tremendous asset to your business, fuel expenses can pile up fast. If you plan to drive around a lot for business purposes, it’s worthwhile to explore a vehicle with good gas mileage. Some fuel-efficient electric vehicles or plug-in hybrids can also qualify for tax credits — meaning more savings on your business car.
8. Think about your brand
Your company car will be an extension of your business, so you’ll want to make sure that whatever vehicle you choose is relevant to your brand. Not every industry prioritizes aesthetics, but consider whether your car needs to impress your clientele or keep up with the competition.
Additionally, consider your car as an advertising opportunity. If you’re looking to get the word out about your services, it may be advantageous to brand your car with the company logo and contact information. This way, if you or your employees are driving all over town, you’ll get added exposure everywhere you go.
9. Research tax write-offs for your business
Having a business car comes with a host of tax benefits, but it’s best that you read up on what tax write-offs you’re actually eligible for before buying a car for business. This will help you keep the appropriate documentation to successfully write off your expenses.
Below you’ll find the two methods you can use to deduct ownership and operating expenses for your business vehicle. Sole proprietors will qualify for either method, but LLCs and corporations will need to use the actual expense deduction. If you qualify for both, it’s important to crunch the numbers or talk with an accountant about which method will give you the largest deduction.
Standard mileage rate
Self-employed individuals are eligible to use the standard mileage rate to deduct the cost of operating a car for business use. The current standard mileage rate is 57.5 cents for every business mile driven. Expenses like registration fees, parking fees and tolls are also eligible for deduction with the standard mileage rate.[2]
You must choose the standard mileage rate in the year that the vehicle is first used for business to be eligible for it in later years. After the first year of business operation, you’ll be allowed to choose from the standard mileage rate or actual expenses method.
Actual auto expenses
If you have high operating costs for your company vehicle, it may be better for you to opt for the actual expense method of deduction.[3] With the actual expenses method, you can deduct the ownership and operation costs listed below:
- Depreciation
- Garage rent
- Gas
- Insurance
- Lease payments
- Licenses
- Oil
- Parking fees
- Registration fees
- Repairs
- Tires
- Tolls
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10. Negotiate for the best price
Just like if you were buying a car for personal use, negotiating the price tag can help you get the most bang for your buck. Look into the fair market value price of your preferred company vehicle using an online appraisal site like Kelley Blue Book and use that information to bargain for a better deal with the seller.[4]
11. Look into commercial car insurance
Whether you have a company-owned vehicle or a personal one that you use for business, it’s best to get covered by a commercial auto policy. These policies are specifically designed to protect vehicles used for business and offer protection for liability, physical damage, medical expenses and coverage against uninsured drivers. Remember to compare quotes to find your most affordable rates.
