If you manage a company and you or your employees do a significant amount of driving for business purposes, it may be a good time to buy a car through business. There are lots of business owners out there that do not put in much thought and decide to buy a company car as they believe that it gives success and prestige in the eyes of the clients and neighbors. However, buying a car is a serious investment and before making this decision, you need to answer yourself the following questions:
a) Do you use your own car more for business purposes rather than personal use? b) Can you take advantage of the tax breaks available for buying a new car? c) Is your own car to small to handle your business needs for delivering goods and/or hauling equipment?
d) Would this acquisition ruin your plans for payroll, expansion and/or equipment purchase?
If you do decide to buy a new car for your business, you’ll have to think about ways to pay for it. If you do not have enough cash, you’ll have to get a loan. Since you are the owner of a small business, you’ll have to fill out a commercial credit application which needs a personal guarantor, which in most of the cases will be you. If money is tight at the moment and getting a loan might be a little cumbersome, you probably would be better by leasing as this option doesn’t imply spending a lot of money upfront.
When you are out looking for a loan to finance your corporate car, the lending institutions will do a thorough evaluation of your firm’s credit rating, along with the rating of the aforementioned guarantor. If you have not established a business credit before, you will have to get things started by getting a company credit card. You will have to use it for purchases and make all of the payments on time in order to establish a good track record and start working on building the credit.
Timing your purchase is also very important. When the economic times are bad, all of the car manufacturers launch special offers, discounts, promotions, incentives and so on, just to grab a few more customers. If during these difficult times your business is in good shape, it probably is the ideal time to buy a new car.
Keep in mind that regardless of the economic and financial situation, December and January have always been great months to buy a car, whether for personal use or for business. Unless you need one right away, it would be recommended to wait for the holidays if you want to save some money which you can invest in your business.
Choosing the car is always something major to think about. If you do a lot of travelling on your own to visit clients, rather than carry big boxes of equipment, it would be wiser to buy something small, like a hatchback. It will get you from point A to point B and you’ll save some money on gas. In the end, it is up to you to decide which make and model is suitable for your business necessities.