The Pros and Cons of Buying a Company Car for Your Small Business

pros cons buying a company car small business purchasing business vehicle work transportation

A small business could benefit from having a way to transport employees and goods for business purposes. Many businesses opt to buy a company car for fast and convenient transportation.

Others prefer to take on the expense of hiring vehicles as needed. Ridesharing apps such as Uber and Lyft have brought down the costs of hiring a taxi, which has further reduced the need for buying a company car. 

As a small business owner, it is up to you to decide whether or not to invest in a company car. To assist with your decision-making process, keep reading for the main pros and cons of buying a company car. 


Benefits of Buying a Company Car

There are numerous benefits to owning a company car. The main advantages of work vehicles are discussed below. 

Vehicle Expenses Are Tax-Deductible

Owning a company car can be beneficial to small business owners because of the tax savings. The total cost of buying the car as well as the cost of using the vehicle to travel for business are both tax-deductible expenses.

The depreciation of the car and vehicle expenses like maintenance and fuel can be added to your business expenses. In case you purchased the car using a loan, the interest payments are also tax-deductible.

All these are great savings for your small business, and you won't be able to take advantage of them if you use a personal car rather than buying a company car for business.

Reduced Insurance Costs

For insurance purposes, it may be better to buy a company car. Insurance companies tend to give companies cheaper insurance rates than those that they give to individuals. This is generally because companies buy larger amounts of insurance coverage and get a discount.

Additionally, if a company car gets into an accident, the personal insurance premium of the individual involved does not get affected. In comparison, when a personal car gets into an accident, the owner's insurance cost increases as they are perceived to be a riskier client.

A Great Way to Advertise

Buying a company car can be great for marketing your company. You can advertise your company's services and contact info on the vehicle and transform it into a walking billboard. This way you advertise your services anywhere you go. 

Getting something like a car wrap or truck graphics design is a great way of marketing on company cars. 

Improved Productivity

A company car is very useful for your business’s productivity as it helps to complete tasks faster. In case you need to deliver goods or pick up items for your business, jumping into your car and going to the desired location may be much faster than using public transport or ordering a taxi.

Boosts Employee Morale

Company cars are one of the most beloved employee perks. Cars are extremely useful to employees allowing them to easily move from place to place. 

Company cars can also be a status symbol for you and your employees. Your clients, friends, and relatives will see you in a different light if you show up for meetings in a beautiful car. Getting a company car can improve an employee's loyalty and motivation to work harder for their company.


Cons of Owning a Company Car

Now that we've told you about the pros, here are some cons to weigh against them. Check them out below.

High Cost

The first con is that vehicles are quite expensive and require a lot of capital investment. As a small business, you may not have enough spare cash lying around to buy a company car. Also, your business may not be able to afford the interest payments from taking out a car loan.

Some costs also come with owning a car such as insurance and unbudgeted repairs, which could cripple your small business if they aren't in the budget.

Complicated Tax Procedures

Company cars may require a lot of record-keeping for tax purposes. Vehicle expenses can only be tax deductible if the car has been used for business purposes alone. In case the vehicle is used for personal reasons, the IRS may require employees to declare this as a non-cash fringe benefit

Companies that use vehicles for both personal and business purposes require comprehensive records and tax filing to ensure that all tax deductibles are legally claimed.

Budget Limitations

The type of car you buy for your company will be limited to the budget available for the car. Small companies with limited budgets may be forced to buy older, outdated vehicle models that employees may not enjoy driving.

In some companies, employees prefer to use their vehicles for work rather than be seen driving around an embarrassing company car.

Cost of Car Maintenance

Owning a company car does come with additional money as well as time requirements. You will need to purchase fuel for the car to move around. The vehicle will also cost you to maintain.

For example, after it reaches a certain mileage, you will be required to service your vehicle. You will also face car wash fees, spare parts fees whenever the car needs to be repaired, and auto insurance premiums. 


Have You Decided on Buying a Company Car?

A company car is very useful to a small business as it may increase the efficiency of operations and boost employee morale. On the other hand, a car requires a lot of capital which a small business may not have. In this case, it could be better for the business to hire taxis as needed.

Before you decide on buying a company car, ensure that you have the budget to cover the cost of the car as well as maintenance and any advertising you intend to place on the car. If the benefits of owning a car outweigh the cost of owning one, then it may be best to go ahead and buy the work vehicle.

Bootstrap Business Blog Newest Posts From Mike Schiemer, Guest Posts, & Blog Outreach Services