If you or your employees do a substantial amount of driving for your business, it may be time to purchase a company vehicle. Some business owners jump into buying a company car because they believe it conveys prestige and success to their customers or neighbors. But buying a vehicle before you really need it can drain your company of needed cash.
Before buying your first vehicle, ask yourself these questions:
- Do you drive your own car more for business than for personal use?
- Is your personal vehicle too small to keep up with your business needs for hauling equipment or delivering goods?
- Can you take advantage of the tax breaks available for purchasing a vehicle?
- Would this purchase rob your business of cash flow you need for expansion, payroll, or equipment purchases?
Affording a Car
If you decide it's time to get a business vehicle, you'll need to decide how to pay for it. You will need a loan if you don't have the cash for the purchase. As a small business owner, this entails completing a commercial credit application, which will also need a personal guarantor, likely you. If you're short on cash and think you might have trouble getting a loan, leasing may be a good option, as you won't need as much money upfront. For more on leasing, read Business Vehicles: Buy or Lease?
When you’re seeking a loan for a business vehicle, lenders will evaluate your company's credit rating as well as your guarantor's credit rating. If you've never established business credit, get started by obtaining at least one company credit card. Start using it for purchases, and make prompt monthly payments to establish a track record and start building your credit.
Shop around for the best loan deal before you visit a dealership. Compare loans online at bankrate.com, MSN’s Auto Loan Center, or other comparison portals. Pay attention to the lenders’ fees as you compare, as well as the total interest you would pay for each loan.
With the Internet, it's never been easier to shop for a vehicle, or to compare features on several models and see how they stack up.
You can investigate car safety and repair records through Consumer Reports and on the carmakers’ own sites. Then browse for available new or used car models in your city through online classified sites such as Edmunds.com, Cars Direct, or AutoTrader. For more on how to decide which type of vehicle to buy, see Choosing the Right Vehicle for Your Business.
Most dealers operate Web sites where they post available vehicles along with their prices. While the site information can become outdated quickly, it will give you a good idea of which dealers in your local area offer the best pricing for the vehicle you have in mind.
Arrive at the dealership with a firm idea of your business vehicle needs and what other dealers are asking for the vehicle. Consider bringing a car-savvy friend along for an independent opinion on any car deal you're offered.
Timing Your Purchase
When economic times are bad, automakers crank out the offers, cutting sticker prices and offering attractive loan terms. If your business remains strong during one of these slumps, it can be a great time to pick up a deal on a new car.
In good times or bad, December and January are good months for car deals. Each autumn the next model-year vehicles start arriving, and dealers put the current model year vehicles on sale. If any of those are left hanging around in January, dealers will be desperate to unload them.
Business reporter Carol Tice contributes to several national and regional business publications.