Companies exploring the possibility of buying a company car or fleet for their employees should keep in mind several factors before potentially putting these cars and trucks to everyday use.
Of course, investing in a vehicle or two should be a no-brainer for companies that require employees to regularly get behind the wheel, including delivery or courier services, as well as those that demand employees travel to meet customers and clients.
But not all businesses are created equal. As such, prior to making a definitive decision, you’ll want to consider a number of important factors. Among these are write-offs for use of a commercial vehicle, the cost of equipment, ongoing maintenance, insurance coverage and other costs the business will incur.
Below are some relevant points companies should work through to determine their best options when purchasing new or used vehicles for commercial use.
New or Used Vehicles
One of the most important factors companies should consider is whether to purchase new or used vehicles. Some benefits of purchasing new vehicles include:
- Tax write-offs: By taking a Section 179 deduction, companies can realize a sizable tax benefit after purchasing a new vehicle for business.
- Lowered interest rates: In addition to having a decreased tax burden, companies won’t have to shell out bookoo bucks for maintenance early on in the vehicle’s lifecycle.
- New technologies: Some manufacturers include built-in GPS systems, adaptive cruise control and lane-departure warnings, all in an effort to promote added safety.
- Warranties: Options include protection from defects for three years (or 36,000 miles), bumper-to-bumper warranties covering repair defects in factory-installed parts and powertrain coverage for the engine, transaxle, and transmission.
New vehicles don’t require much maintenance and can afford businesses the opportunity to deduct a large portion of the total purchase price within the first year of use.
However, there are some drawbacks to consider. Initially, the higher price of purchasing a new vehicle isn’t something companies usually budget for, especially for small businesses with limited budgets. Depreciation should be another big concern, as all vehicles dip in value the moment they’re driven off the lot. Furthermore, insurance premiums tend to be higher until the vehicle is paid in full.
Conversely, if you decide to invest in a fleet of used vehicles, you’ll initially spend less. With that being said, however, you’ll incur some routine maintenance costs — both cheap and expensive — for new tires, belts, and fans, as well as oil changes and fluid replenishment, which new vehicles wouldn’t incur for quite some time after purchase.
Why You Need a Good Fleet
There are several reasons companies invest in commercial vehicles for daily operation. Case in point: The ability to deliver services in a timely fashion, reach clients for meetings, or simply allowing employees to easily commute to work each day. When selecting vehicles to add to the fleet, business owners should consider the vehicle’s versatility, MPG and safety features.
Of course, if your company car or fleet is continually in the shop for maintenance, or is costing you more than what you initially anticipated, then this could potentially hinder any future business success. Whether new or used, choosing the right cars — and properly maintaining them with name-brand tires and parts over the course of their lifetime — will positively impact your business.
And because life is all about good impressions, having a company car or fleet that’s aesthetically pleasing, as well as reliable and trustworthy, will not only turn heads, but also potentially sway customers and prospects to buy your product or service. Talk about paying big dividends.
The Final Verdict: Used Vs. New
Ultimately, every business must weigh a number of different factors in deciding whether to put into motion — no pun intended — the use of a company car or fleet.
Indeed, the intended use of these vehicles, company clientele, maintenance costs, tax incentives and write-offs, rebates for electric vehicles and other factors should be accounted for when deciding which vehicles will work best for your company.
But for businesses that want to save money, receive the greatest ROI, and ensure their company car or fleet has a long lifecycle, ensuring these vehicles undergo proper and ongoing maintenance is imperative. Before making the final decision, weigh these factors in deciding, once and for all, whether the investment will help you better attain enhanced business success.