Effective and reliable transportation can play a crucial part in maintaining a profitable business. As a small business owner, you know how important it is to make wise financial choices to benefit your company’s growth and success, so you may be considering whether to purchase a company vehicle.
While it might seem like a significant expense, there are advantages and drawbacks when it comes to buying a vehicle for your small business. In this article, we’ll review the tax benefits, potential impact on profits, and how to insure your vehicle while offering tips to help find the right auto insurance for your company car.
Advantages of Buying a Car for Your Small Business
If you find you’re using your personal vehicle for business purposes on a fairly regular basis, you may want to consider purchasing a company car for your small business. Whether you’ll use it for completing deliveries or to expand your reach, purchasing a company vehicle has a variety of advantages, including tax and insurance benefits. Here is an overview of the pros of buying a company vehicle:
Taking advantage of tax deductions: If you purchase a car through your small business, you’ll be able to claim a variety of tax deductions for things like ownership, maintenance, and gas. You can also deduct trip expenses if you’ll need to travel for work and take the company car. The price of purchasing or leasing a car can usually be deducted, as well as the cost of insuring the vehicle.
Providing customers and employees with benefits: A company vehicle may make it easier for you and your employees to travel to meet with clients, helping you to communicate with customers and sell your goods or services. Access to the company car may also be a valuable perk for your employees, offering them transportation and independence at work.
Preventing a personal auto insurance claim: Having a vehicle for your small business, your personal auto insurance won’t be affected if you or one of your employees gets into an accident in the company car. Your company vehicle will be covered under your commercial or business auto insurance, which is designed to protect your company in the event of an accident. Commercial auto insurance can help protect against financial losses and covers both physical and liability damages at much higher amounts than personal insurance policies.
Disadvantages of Buying a Car for Your Small Business
There are also disadvantages of a small business owning a vehicle, such as upkeep and loss of value. This section will review some of the setbacks associated with having a company car.
Maintenance and repair expenses: Purchasing a car for your small business means you’re responsible as the business owner for its maintenance and repair costs. These expenses can accumulate over time, especially if the vehicle requires frequent repairs or major servicing.
High upfront costs: Buying a vehicle for your small business requires a substantial upfront investment. This can strain your finances, especially if your business is new or you have limited capital. These costs lead many small business owners to search for used cars or lease vehicles.
Depreciation: One disadvantage of purchasing any vehicle is the depreciation of its value over time. Vehicles tend to lose their value quickly and can result in a significant loss if you plan to sell the car in the future.
SelectQuote Can Help You Find the Auto Insurance You Need
As the decision-maker for your small business operations, you may deal with overwhelming choices every day, including whether to buy a vehicle for your company. If you decide to buy a company car, SelectQuote is here to help you navigate the insurance process so you don’t have to worry about finding the coverage you need. You can rely on our nearly 40 years of industry experience and licensed insurance agents to help you compare rates from several of the nation’s leading insurance carriers in just minutes. Whether you’re looking for policies for your personal or professional vehicles, we shop while you save.
