What if your business had nowhere to go–literally?
It’s important for your business to have its own car (or maybe more than one). Unfortunately, many business owners don’t know how to start this process.
Wondering how to go about buying a car under a business name? Keep reading to discover everything you need to know!
When You Can Use It
Buying a company car seems like a pretty straightforward idea. Nonetheless, many people do not understand when they can and cannot use this vehicle.
Fortunately, the answer is right there in the name “business car.” This car is intended to be used only for official company business.
This must be taken pretty seriously. After all, you will be required to keep documentation regarding when the car was used, how far it was driven, and so on.
On the bright side, this may contribute to the longevity of the car. If you are not using it each day, it may last far longer than a personal car.
Buy or Modify?
So far, we have focused on buying a new vehicle outright. However, this is not your only option.
If you have a spare vehicle that you do not use very often, you may be able to convert it into a company car. This option has a few different benefits and drawbacks.
On the plus side, this is the cheapest option. For a small business, this may be much more valuable than shelling out for a whole new ride.
On the other hand, buying a business car opens up a world of tax opportunities. You may be better off getting something new and reaping additional tax deduction benefits.
Tax: Check the Fine Print
Having a company car means additional deductions for your business. For example, you can claim the cost of a new car as a business asset and deduct it accordingly.
If you use the car enough, you may be able to deduct driving experiences. To do so, you must be able to prove that these expenses comprised at least 2% of your business AGI.
Furthermore, you can deduct the depreciation expenses of the vehicle over time. You can also deduct the cost of things like repairs and maintenance. Even the interest on your vehicle can be deducted as a standard business expense.
Altogether, this creates a powerful incentive for companies to buy company cars.
Places and Spaces
When you buy a personal vehicle, size and space are some of your biggest (no pun intended) concerns. Do you need something big enough to transport a whole family at once? Or do you need a sporty two-seater so you can enjoy the open road?
You should ask similar questions regarding your business vehicle. Do you need to transport many employees at once, or possibly transport large numbers of supplies? If so, you may need a larger vehicle.
If you are mostly just helping one or two employees travel at a time, you can grab yourself a smaller and cheaper vehicle.
Who Owns What?
Our guide chiefly focuses on a company buying a car in their own name. However, there is another approach you may want to consider.
Employees may actually own their own business cars. As you might expect, this has its own set of benefits and drawbacks.
For example, you don’t have to shell out money for a company car when the employee takes care of it. But that also means the employee will be reaping the tax benefits instead of you.
For the sake of those benefits and the fluid nature of modern employment, we recommend getting a new car under your business name. Make sure you speak with local experts who can help you handle title & registration.
Ways to Buy
Let’s say you’ve decided to buy a new car instead of using one that’s already available. It’s important that you understand that you have many different options when it comes to purchasing and financing.
Obviously, you can buy a new vehicle outright from any given dealership. It is definitely worth it to consult with the dealership and figure out which vehicles may be eligible for special tax breaks and which are not.
You can also buy a used vehicle. This is a popular option because it saves money while offering a similar level of performance. And the money you save could go towards other elements of your business, which is especially important for a startup.
Finally, there’s the most popular way of getting a business vehicle: leasing one. Lease payments are effectively operating expenses, meaning you get to start deducting right away. And one of the only real downsides of leasing, the limited mileage, may be a non-issue for many businesses who do not travel far from home base.
Bells and Whistles: Do You Need Them?
Here’s an open secret: your company car does not need a lot of bells and whistles.
Most business vehicles are designed to simply get someone from Point A to Point B. And some of the better added features from yesteryear (such as built-in GPS) have been replaced with free and reliable smartphone apps.
There is nothing wrong with getting a simple car to match your company’s simple needs. Such a decision is financially-wise and lets you start enjoying deduction benefits without breaking the bank to do so.
Balancing Function and Form
Aside from things like ease-of-use and gas mileage, there is one more consideration when buying a company car: how it looks.
Most business vehicles are branded. This provides a cheap and easy way of building your brand wherever the car goes.
However, slapping your brand on a piece of junk is dangerous. It may mean that potential customers think your company is a piece of junk as well!
Long story short? Try to balance function and form when you are out car shopping.
Buying a Car Under a Business Name: The Bottom Line
Now you know the tricks to buying a car under a business name. But do you know how else to make running a business easier?
We specialize in helping businesses save time and streamline their efforts. To see how much time we can save you and your company, check out our forms and templates!