Tue 13 Dec 2011
It is necessary in certain small business functions to use a vehicle. Not all business is done over the phone or by customers simply walking into your store. In many instances, a vehicle is needed to accomplish and complete business actions and transactions.
However, how do you determine if you need to purchase a small business vehicle and which car or automobile should you use?
Needs of the Small Business
First, you need to ascertain the needs of your small business. Using a bit of logic will help you put your small business into a category of "need." "helpful," or "unnecessary."
Obviously, if your small business is a taxi service or some form of delivery service, a vehicle will be a requirement as a business function. However, say you own a donut shop chain in your city. If you deliver donuts to clients, or say you use only one location to make and bake your donuts and need to deliver the goods to other chain stores, a vehicle is necessary.
Here are some other examples where a small business vehicle might be necessary to fulfill your business functions.
- Sales travel: Does your business require you or your sales team to travel in order to meet and make presentations to prospective clients? This could be a case where a company car would be useful. However, using personal vehicles and reimbursing per mile instead may be a better option financially. Consider how many miles a car is driven per year, and whether a sales employee is willing to apply his or her own car for that use.
- Deliver goods: Do you deliver your products to clients? Or perhaps you a courier to deliver items from one place to another. A small business vehicle like a delivery truck with your company brand or logo may be ideal for everyday business use.
- Business items: Perhaps you operate a small catering company. You will need a certain kind of small business vehicle that can transport your service items to an event.
- Client transportation: A taxi or limo service is a good example of this. This is definitely a case for a small business vehicle, or even a fleet, that can operate under a business auto insurance policy.
- Advertising: Perhaps you just want to help get your business name in front of more people. A company car may not be suitable for this sole purpose, but a personal vehicle could do the trick with a tax advantage to the owner.
Cost of the Automobile
The cost of the company car could be a barrier for some small businesses. However, if you can afford buying this capital asset, then look at the other cost details for a company car.
- Buying or Leasing: Purchasing a new or used automobile will increase your assists on your balance sheet. You'll also get the advantage of deducting depreciation expense from that asset each year. Leasing a vehicle does not give you any ownership benefit, but the cost of the lease is a fully deductible expense.
- Insurance: Consider what types of small business vehicle insurance you will need, including liability, collision, and comprehensive coverage all under a commercial auto policy.
- Custom painting/interior: Will your small business vehicle need a makeover to display your brand name? Perhaps you want a custom paint job for the car or renovate the interior to accommodate guests, products, or what ever else your intend to use the company car for.
Image and Branding
If you company car can help improve your business branding and name recognition, the ROI may be worth the cost of the car. Some types of small businesses will benefit from a car with a name and logo painted on it, especially if seen in the course of doing business, such as deliveries, catering setups, etc.
The last thing to consider about a small business vehicle is who will be driving. Be sure any drivers of your company car have a clean driving record. You don't want the hassle and extra expense of dealing with accidents, especially if your company driver is at fault.