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What to consider before buying your first business vehicle

By Pauline Muindi | December 30th 2020 at 11:14:24 GMT +0300

Many entrepreneurs use their personal cars for business purposes, especially at the beginning stages of business. However, as your business continues to grow, it comes a time when buying a separate company car is necessary.

Having a separate vehicle for your business can help the branding and reputation of your business. It may also have tax advantages as it is easier to claim deductions on mileage. Additionally, having a dedicated company car will have no impact on your personal auto insurance plans. You can also let employees use the car, making it an attractive perk.

Buying your first company car can be a daunting task. A lot of thought should go into choosing the ideal model, size and other specs for your company car. With that in mind, here are factors to consider when buying a car for business use:

Your Budget

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Before you even start shopping for a car, you need to have clarity regarding how much you can afford to spend. Figuring out the price range you’re looking for will help you narrow down your choices when searching online or at a car lot.

A business car is a business expense and investment, so you shouldn’t use your personal finances for this purchase – unless you’re loaning it to the business or adding it as capital to the business. If your business is in the red, it might not be the best time to invest in a car. This type of purchase can keep your business liabilities above your assets.

While it is advisable to go for a low-cost option, don’t forget to the reliability and durability of the vehicle. The vehicle will probably be on the road a lot and might also be driven by employees, who may not be as invested in taking car of it as you would. You want to avoid a car that is likely to keep breaking down, which will be additional business expenses.

When thinking about the budget for acquiring a new company car, also include insurance costs as a recurring expense. Check with an insurance agent on the kind of insurance you will need, depending on how you intent to use the vehicle.

Car dealers and owners are always willing to negotiate – so don’t be afraid to check out cars that are slightly above your budget.

Think about Size and Model

Size and model are important factors to consider when buying a vehicle for your business. Think about how you will be using the car. Do you need it to ferry products to your customers or to shuttle employees to and from client meetings? While a fancy German car might sound like a powerful statement, it will be poor use of resources if you’re only using it to carry loads of stock to clients.

The space and model of vehicle should be suited to the needs of your business. For example, if you are moving cold stock, the car you choose should also have space for refrigeration. If you’re a vet, you will need a car that has space to safely transport animals.

Before purchasing, make a list of all your requirements and shop accordingly.

Prioritise Fuel Economy

When listing the specifications to look out for, prioritize fuel economy. As we’ve noted, this vehicle will probably be on the road a lot – which means you will be spending a considerable amount of money on fuel. Adding a car to your business assets shouldn’t mean spending the equivalent of a high-roller salary just to keep it running.

Generally speaking, smaller cars consume less fuel – therefore look for the smallest car that fits your intended usage. Once bought, you can also boost your car’s fuel efficiency through measures such as maintaining moderate driving speeds, avoiding traffic jams, getting the engine tuned regularly and using high quality fuel.

Used or New?

You will also have to think about whether to buy a new or used vehicle. The answer to this depends on various factors such as your preference and budget. New cars will generally cost you more in price and taxes, but they are a worthy investment in the long run. While a second-hand car might break down constantly, a new car might go for as long as three years without needing spare parts if you service it regularly.

But second-hand cars aren’t all that bad. A relatively new used car will have slower depreciation than a new one – which is an important factor if you’re likely to resell the car. According to valuers, a new car loses approximately 20 per cent of its monetary value in the first year alone. After the first year, the car will lose additional 10-15 per cent every year for five years.

If you’re importing a used car, bear in mind that such cars are usually around 8 years old. With the lifespan of a car being around 10-15 years by international standards, you will be getting a car that will be prone to constant breakdowns. This means you will find yourself spending more on repairs and spare parts, not to mention the indirect costs caused by the inconvenience of constant breakdowns.

Second Hand Car Car Insurance Fuel Economy
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