For those of us working hard in the business world, we dream of having an ideal location, to be killing it in sales, to have great word of mouth, and, ideally, to be so well off that we can afford a company car. To us, this could be the pinnacle of success.
Anyone who has ever owned a car knows how fast the expenses can run up a hefty bill. Between gas, tires, and other routine maintenance, a minor daily commute can quickly become quite pricey. Let alone, if our job requires more than a short commute in the morning.
Most of us don’t work within walking distance of our homes and/or have multiple work-related locations that we drive to daily. Therefore, not having a car isn’t really an option for almost any successful business.
However, is purchasing a company car a practical move? Check out these top 4 things we should consider before deciding if we should buy a company car.
Is the company in the best financial situation for a company car?
If we’re just starting out with a new small business, we may not be in the financial situation to make such an extravagant purchase just yet. When deciding if we are in the best financial place to purchase a company vehicle consider all the expenses first. For example, we can’t just be considering the price of the car itself, we must also consider things like upkeep, insurance, taxes, and more. If we’re in the market for a company car, checking out a car dealership in Enfield, CT could be an ideal starting point.
Should there be a specific car for business?
Is buying a new car specifically for our company a practical choice? According to Chron, “In some cases, you and your employees will be better off keeping your own vehicles and being reimbursed by your company for that use.” This is another reason why it is important to make sure we are figuring out the entire cost of buying a vehicle for our business. Including what is tax-deductible and what can be written off. For example, according to the IRS, when purchasing a car specifically for our business we can “deduct its entire cost of operation.” However, “if you use the car for both business and personal purposes, you may deduct only the cost of its business use.”
Expenses are tax-deductible
In most cases, when a car is used specifically for business, we can write off expenses like oil changes, gas, tires, and other routine maintenance to some degree. In most cases, we can generally at least write off the mileage. According to the IRS, “[we] can generally figure the amount of [our] deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method.” However, they note that it’s best to figure out which method gives us the best deductible as we can sometimes get away with using both methods.
Consider keeping the receipts from all car expenses in customized tax returns folders so that we’re ready to file these deductibles come tax season.
Consider going electric for the financial incentive
If our company car needs can be met with a smaller vehicle (i.e. not an SUV or van), then going electric could be a great alternative to save some money long term. According to the Office of Efficiency & Renewable Energy, “The federal government and a number of states offer financial incentives, including tax credits, for lowering the up-front costs of plug-in electric vehicles”.
Not only could there be some tax benefits of going electric, but we will get the added benefit of furthering our companies’ image of caring about the environment and we will save a lot of money on fuel.
