Did you know that it’s possible to get a car loan under your business name? There are many reasons you might consider getting a company car: you can save from own vehicle from wear and tear; impress clients; advertise on the go; enjoy tax breaks... the list goes on.
Before you pull the trigger, though, there are certain steps you should take to ensure your new vehicle improves business rather than dampens it. After all, a car is an investment—a purchase that creates wealth—but without following the right procedures, a company car can turn out to be a major financial bang versus a boom.
Follow these seven steps and you’ll be in good shape for success!
1, Identify your primary purpose
What’s the reason you’re considering a company car? If you’re operating a service business, you might need a van large enough to carry all your tools and supplies across job sites. A traveling salesmen? Maybe you’re better suited for a roomy hybrid with great MPG. How about a consultant or broker? I’m guessing a German sports car sounds pretty fun and practical.
And it may be that there is valid reason for you to shop in the luxury market, but the affiliated cost of monthly insurance, standard maintenance, and occasional care are just a few things everyone should know about their car.
A contractor who might accidentally beat up their van on occasion, pulling supplies in and out, can probably get away with shopping used. White-collared professionals who need to impress their clients can shop used too, but they should still know the price associated with a Mercedes service opposed to tuning up a Toyota.
Identify whatever motivated your initial inspiration and find features that support that cause, whether that may be a built-in navigation system or an extended back cabin for a posh transportation company.
2, Check-in with your budget
Next step: is said car of your choice within your actual means? Of course, we all wish we were cutting through town in a cutting-edge coupe, but not if it’s going to break the bank doing so. Your company’s profit margins could be looking fine and cushioned right now, but what is the sale forecast looking like in the months ahead?
3, Obtain your tax ID number
In order to register a vehicle under a company name, you first need to register as a company (duh). Hopefully this is common sense, but otherwise note that driving for Uber or Lyft does not mean you can buy a car and write it off as a business expense.
4, Create a credit profile (then build your score)
Some aren’t aware that businesses have credit scores just like individual consumers. To create a profile, contact Dun & Bradstreet, the major credit bureau for businesses. Note: You’ll need at least three open trade lines with large retailers before you can open an account.
5, Look for commercial sale departments
These B2B teams work directly with people like yourself by facilitating the sale and registration of business cars and commercial vehicles. You can also find certain manufacturers, such as GM Fleet, to enjoy incentives and programs designed to benefit company fleet.
6, Consider important add-ons
It’s no surprise that new vehicles depreciate—and fast. While spending more money on a car is the last thing you want to do as a frugal business owner, the cost of those shiny add-ons might be worth it. All-weather features and brushed aluminum finishes are the types of perks that will help your company car retain its value.
7, Finance in your company name
Once you have your vehicle of choice, it’s time to gather all of your financials and head to a lender. Be smart and compare interest rates and loan terms ahead of time so that you know you’re getting the best deal in town.
Note: Sometimes it’s smarter to lease a company car than to buy one; although the purchase can save you a lot of money as a business expense write-off on your tax bill, the true cost savings takes time to accumulate. If your company could use the money now versus later, consider this option.
Once you provide a guaranty for the loan, you’re all set! You’ll be on the road driving to better business on the horizon.