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 Is it super outdated to purchase a company vehicle for a small business?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Here’s the answer: having a company car is not an outdated business practice at all, even if you’re a small business—but it’s only a good investment if you have a business that truly warrants a good vehicle.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.
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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.
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.