Around 59 percent of business owners said they needed a vehicle to successfully run their business. However, getting a company vehicle is not always as straightforward or necessary as you may initially think. Having a company vehicle or fleet certainly has its advantages; it can reduce your overall costs, provide a great branding canvas, and allow you to expand your business’ demographic market. However, there are also potential situations that come with owning a business vehicle. As an owner and manager, you would have to deal with regular upgrades for your vehicles, take on the responsibility (and cost) of regular vehicle maintenance, and also deal with the possibility of employees having an accident in the vehicle. With this in mind, it is no secret that taking this step should be done with much consideration to the benefits, the drawbacks, and just how suitable a business vehicle may be for your business. So how do you decide it’s time to add a vehicle to your business? Start with these three simple questions.
Can Your Business Afford It – Now And In The Future?
One of the major deciding factors when looking to add a business vehicle is your business’ financial health. First, you need to consider how you intend to finance your vehicle purchase. Most businesses utilize their retained earnings, rely on business/auto loans and other credit financing, or employ a mix of both. Knowing how much you can spend or borrow will dictate the vehicle purchasing options for your business as well; whether it is an outright purchase or you choose to lease a vehicle. It also tells you if you can afford a new or customized business vehicle or would be better off financially if you bought a second-hand business vehicle.
Don’t forget about the follow on costs as well. There will be regular repair and maintenance needed, motor insurance, additional space needs for parking, and the cost of any spare parts. Your business’ cash flow should be able to comfortably cover these costs in the initial months of purchase and the years after. Also, if you do choose to lease or use a business credit card for an expense, you need to consider the interest rates, which bump up those estimated costs.
Do You Have The Human Resources To Manage It?
You will also need at least one employee to drive and fulfill the business role involving the business vehicle – for example, a delivery driver or employee transportation. This raises another question: do you have the manpower to fulfill this? If you do not have the employee already on your payroll, it will involve recruiting an additional employee – and adding another salary to your payroll costs. In addition, vehicle drivers may need to be trained in efficient driving practices or specialized driving rules and tips, such as those training and certifications needed to operate large goods vehicles. You will also need to think of any training for employees if your business will require a customized vehicle, such as standard maintenance training to maximize the reliability of the vehicle model you do opt to buy.
Will A Vehicle Ultimately Add Or Detract Value From Your Business?
Finally – and possibly most importantly – think about whether a business vehicle fits into your business. It may be the norm to have a company vehicle or company fleet, but the bottom line is that investing in a vehicle should enhance your business’ earning prospects or make it easier to achieve its intended goals. On the financial side, compare the cost of outsourcing your shipping and delivery needs per annum to the estimated cost of owning your own vehicle. Include the costs of purchase/leasing, salary for the driver and any standard maintenance like petrol. If it works out to be less than the cost of outsourcing, the investment may be worthwhile.
However, not all benefits are numerical. Company vehicles can also be used as a benefit to employees and drive employee satisfaction and loyalty to the business. In this case, businesses will be able to claim tax benefits.
Making business investment decisions such as buying a business vehicle comes with a hefty price tag, but also requires a longer time commitment. Therefore, it should be made with care and much consideration about not just the business’ present condition, but also plans for its future. Adding an unnecessary asset or choosing the wrong time to invest in a vehicle may very well throw off the financial balance of your business, and end up costing more than it adds. Make sure your company not only needs a vehicle, but is ready to utilize one to its full potential.
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