Whether you are just launching your own business or looking to expand your small business into new markets, you will be faced with key asset investment decisions – like whether to invest in a business vehicle. In a survey by Ford and Manta, 59 percent of business owners said they need a vehicle to run their business successfully. Furthermore, only 42 percent of small business owners use their business vehicles solely for business purposes.
As your business grows and the need for business vehicles grows with it, there comes a time where business owners will find themselves asking: Is it time to invest in a vehicle for my business? From whether you can afford the costs of buying and protecting a business vehicle to whether investing in a vehicle aligns with your business’ strategy, here are a few questions that can help you decide whether it is time to secure your first business vehicle.
Can My Business’ Finances Afford The Initial Price Tag And Ongoing Costs?
One of the largest determinants in your decision to purchase a business vehicle will be whether your business can financially afford to do so. Many business owners consider the initial purchase price of a vehicle to be the sole cost. However, investing in a business vehicle also comes with the additional costs of maintenance, labor and wages (for drivers) and relevant credit costs (if financing if used). Before deciding it is time to buy your first business vehicle, businesses must decide whether they can afford to invest in one – and how to finance their vehicle purchase.
Those that lack capital or wish to avoid owning a vehicle outright can utilize a leasing agreement instead. Then there is the cost of financing the vehicle. If you re not using retained earnings from the business or personal savings, alternative credit options will all come with their own cost of financing. For instance, the average auto loan interest rate is 5.61 percent for new cars and 9.65 percent for used cars. However, these rates will depend on your credit rating.
Therefore, it is always recommended that business owners access their free credit report. Before this, you should decide how much you can afford to spend on a business vehicle and consult vehicle ratings and reviews to gain an idea of the ideal business vehicle and the average costs you can expect to pay. Reviewing platforms allow you to gain insights from both customers and experts in order to make the decision that best fits your business.
Will There Be Optimal Opportunity And Need For A Vehicle As A Business Asset?
Another question that can help you determine whether your business needs a vehicle is whether there will be adequate use for a business vehicle. The emphasis here should be on adequate usage of the vehicle. Investing in a business vehicle can be a sizeable financial decision. As a business owner/manager, you must be certain that your investment will produce favorable returns.
To start, list the purposes you would use the vehicle for in your business. Will it be used every day or infrequently? What returns do you expect to see from using a business vehicle? For instance, if you plan to buy a business vehicle to offer customer delivery in-house, think of your sales levels and frequency of deliveries each week. If the intended use of the vehicle is meant to be rare or a few times a year, then you may be better off utilizing your personal vehicle in your business.
How Will It Aid The Achievement Of Your Businesses Goals?
Lastly, how does owning a vehicle help you achieve your business goals? If it is to introduce delivery services to your customers, why is owning your business vehicle better than outsourcing your logistics business function? Some business owners find that it can be cheaper and more convenient. Owning a business vehicle also has tax benefits such as the deduction of depreciation and any interest paid on an auto loan.
Another business goal that a business vehicle can help you achieve is increasing the branding of your business. Vehicle wraps and graphics can get the attention of the general public. Also, buying a business vehicle to be used by employees can increase employee productivity and satisfaction if offered as an employee benefit.
Like all other financial decisions in your business, buying a business vehicle calls for considerable forethought and planning. Before making the leap, make sure you can comfortably answer these questions. That way, you can be sure that the addition of a business vehicle will take you closer to your business goals – both financially and strategically.