Nowadays, it seems like company
cars are reserved for corporations or wealthy proprietors. Is it super outdated
to purchase a company vehicle for a small business? More importantly, is a
company car a good investment or a total waste of money?
Here’s the answer: having a
company car is not an outdated business practice at all, even if you’re a small
business—but it’s only a good investment if you have a business that truly
warrants a good vehicle.
Let’s review some of the
situations in which it would be beneficial (and not beneficial) to have a
company car.
Do You Have to Travel for Work?
If you’re weighing whether or not
you should buy a company car, the most important thing you need to consider is
if your business really requires that you drive on a regular basis.
A company car may be one of the
most important assets of an on-the-go business. If you’re a contractor or
salesperson, you’ll need a reliable car to get around town, and you might even
need a vehicle that’s suited to carrying the equipment you’ll need to fulfill
your job duties. And if you’re using a mobile sales app on a smartphone or tablet, you
might appreciate having a vehicle that’s able to charge your devices while
you’re driving.
You might also benefit from a
company car if you’re a businessperson who’s got to travel frequently for
business meetings or client pitches. If you got a company car with Bluetooth,
you could easily answer calls while you’re driving so you’ll be productive even
when you’re away from the office.
Consider Tax Savings
You might be able to do any or all
of those things in your personal vehicle, but having a company vehicle could
make it easier to reap tax savings on your annual return. You can get tax
write-offs on gasoline for the number of miles you accumulate when you’re
driving for business purposes. With a company vehicle, it’s much easier to
track your miles because you don’t need to separate your business miles from
your personal miles.
There’s another great tax saving
you can claim when you own a company vehicle: depreciation. If you’re not
familiar, depreciation is when an asset you have loses value due to age and
wear-and-tear. All vehicles depreciate in value over time (in fact, a brand new
vehicle loses a substantial amount of value the moment you drive it off the
lot). You can use federal guidelines to calculate how much your company assets
(vehicle included) depreciated in value, and then you can get a tax deduction
based on that amount.
Pro Tip: If you plan on deducting gas mileage when you file your
business taxes, be sure to use a trip calculator.
Dress to Impress (But Don’t be Showy)
There’s no denying that image is
everything when you’re in business. There’s serious reputation risk whenever your professional image
looks sloppy. Just like you’d want to dress
in sharp business attire when you go to a business meeting or
networking event, it also pays to show up to any business outing in a good-looking
car.
The key, though, is not to be too
showy. If you buy a Porsche or Lamborghini as your company vehicle, it’ll look
like you’re being desperate and ostentatious. Go for a luxury vehicle rather
than a sports car (look for used Audi cars for sale if your business can’t
afford a brand-new luxury car, or maybe look for a used Mercedes-Benz).
When your business partners or
clients see you in a luxury vehicle, it’ll give the impression that you’re
successful, and thus, dependable.
Pro Tip: Remember not to explicitly mention to anyone that you
drive a luxury vehicle—that’ll also make it seem like you’re trying hard to
sell yourself.
Lease Instead of Buy
Your business is going to shell
out a lot of money to purchase a good company car—and if you’re a startup
business you might already have a minimal budget as it is. Rather than buying a
company car, consider leasing one.
Car leasing works in the same way
that apartment leases do: you rent for a limited amount of time (usually 1 to 3
years), and when your lease is up, you can renew the lease or buy the vehicle
outright. If you choose to renew the lease, you’re typically able to lease
another brand-new vehicle that’s the year’s latest model.
The Verdict
Acquiring a
company car isn’t an outdated practice at all! But you should only do it if
your business truly requires that you drive frequently and look good doing it.
