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Some of the most popular business cars on the market include the Audi A8, Cadillac CTS-V and Chevy Volt, according to Inc. Choosing the right car for your business may be a no-brainer, but figuring out the logistics of how to do it proves to be more complicated. From finding the right price to negotiating the loan details, buying a vehicle takes serious planning. Simplify the process with the following tips:
Buy a Car Through Your Business
If you’re planning to use your new car for both work and pleasure, buying it through your company may not be the best decision. The IRS is strict about business vehicle use. If you’re going to use it for personal purposes, then you cannot expense its related costs. However, if you’re going to exclusively use the car for business, you can enjoy deeper tax savings and make your vehicle payment through your business funds.
Document Your Drivers
Document all drivers on your business vehicles, how they are going to use them and for what types of purposes. Remember that contractors and interns should also be included on your list. Speak to your company’s attorney about potential liability when employees are using a business-owned vehicle and what you need to know before negotiating a new car purchase. Next, look into a commercial auto insurance policy for your business that covers all involved parties.
Expand Your Market
Focus on reducing costs in your business by finding the best commercial auto insurance, car loan interest rate and price of the vehicle. Consider purchasing a used vehicle for your business to offset expenses and free up more cash flow. Use the extra money to invest in additional cars or allocate it for your other business needs.
Broaden your search to nearby cities to fit your needs. For example, if your business entertains corporate clients, you may require a reliable, luxury vehicle. Alternatively, if you mostly bring prototypes and samples to business meetings, you need a van or car with a durable interior and enough space. Use a site like DriveTime to narrow your focus to car criteria and see what cities can accommodate those needs.
Consult an Accountant
Buying a car through your business comes with tax savings and financial advantages. Speak with your business accountant about mileage deductions, repairs, standard mileage rate and more. Keep in mind that tax law limits vehicle depreciation write-off to a specific dollar limit depending on if it’s new or pre-owned.
The type of business vehicle you buy also determines your write-off. A heavy SUV, like an Escalade, Lincoln Navigator or Ford Exhibition, comes with a higher depreciation limit than its smaller car counterparts. Environmentally conscious companies should also consider an electric vehicle like the Chevy Volt to enjoy a tax credit.
Consider Leasing
If you need multiple cars, consider buying used vehicles in combination with leasing new ones. Free up your cash flow and focus on the quality of your new vehicles. You may end up spending more money than if you bought outright in the long-term, but in the short-term, you have more financial flexibility. Leasing a car also comes with different tax advantages. While you can’t claim a depreciation on the car since you don’t own it, you can deduct part of the lease payment on your taxes.
