How to Choose the Right Car for Your Business
Should you buy a ute or a van? Take out a chattel mortgage or lease the vehicle? When it comes to buying commercial cars, the options can seem baffling.
However, the goal is actually simple: good value for money. Whether you run your own small business or are in charge of an extensive fleet of vehicles for a larger company, you have to make sure the vehicle will be up to the task.
Below are important questions that can help you find the right vehicle for your business.
Who Uses the Car?
The place to start is with the fundamental question: Who should have a vehicle?
Traditionally, SMEs use company cars as a benefit to reward their most valuable employees. As a result, there are far more 'perk drivers' within this sector than there are in larger organisations. While this has its benefits in terms of staff motivation and retention, it can also be very expensive, as many small businesses use cash or hire purchase agreements to fund their vehicles, and in doing so, take on all the risks of ownership such as depreciation, repairs, servicing and maintenance costs.
One of the factors that have to be considered in the choice of business vehicles, is what the vehicle portrays about the company and the person driving it. Having a ‘brand’ image is important for even the smallest business these days, and often a car will be the thing that makes the first impression on a customer or client.
Of course, you don’t have to have every vehicle associated with your company emblazoned in logos and advertising, but simple things such as choosing a brand-friendly colour scheme can make a subtle yet important statement.
How Much Will it Cost You?
Having established who needs a vehicle and for what purpose, business owners then need to align the costs with the value of the vehicle and where possible, fix them.
Many fund their company vehicles using cash or hire purchase, however, paying upfront can put a strain on cash flow and expose the business to fluctuating costs.
Alternative funding methods, such as leasing, can bring immediate cost efficiencies, requiring minimal cash outlay and freeing capital to be used more productively. The business also avoids being saddled with a depreciating asset, while all costs can be fixed and budgeted for in advance. Leasing can also be more tax-efficient as a small business could potentially claim back 100% of the VAT if the vehicle is used solely for business purposes.
However, it also means that you’ve laid out money on something that you don’t actually own, and is therefore not an actual asset belonging to the company. If you do decide to buy the vehicle at the end of the lease, it will ultimately cost much more than if you had bought it outright in the first place.
Cost of Ownership
When calculating the whole-life costs of a vehicle, remember to consider maintenance, repairs, accidents and driver training to avoid unexpected outlay over the duration of the lease.
Business owners can make further savings through the car selection policy. Higher emitting vehicles are attracting ever-rising taxes, which were reinforced by the changed tax bands, based on emissions, announced in the last budget. By choosing more efficient vehicles, the tax savings and environmental benefits to the business will be considerable.
Every country has its own rules about company vehicles and taxation, so once again looking into things a bit deeper or taking professional advice from your accountant is vital in order to avoid making a costly mistake. Things such as carbon dioxide emissions and performance-related factors can really come into play here, so make sure you know exactly what extra costs might be involved in order to abide by official regulations.
What Vehicle Does Your Business Need?
It is important to know exactly what the car needs to be capable of doing, how much mileage it will have to do, how many employees it will be transporting, and so on. Smaller cars are usually more fuel-efficient, but a bigger, luxury-brand executive car can be a necessary expense, depending on the job it is required to do. Depending on the business area of operation, a business owner might want to make a statement by having an unusual car with lots of character.
The choice of vehicle is critical to business efficiency. For example, a business that in the course of its work clocks up thousands of motorway miles each year will have different requirements from a company that only needs to make short journeys in towns and cities. Light commercial vehicles require an even greater level of insight to understand how they can be used efficiently.
By owning a fleet of vehicles, your business has more freedom to do what it wants to do with the cars, in terms of technology, fuel efficiency and emissions, and design. From an aesthetic point of view, using the same car for many years can establish brand recognition, especially in the areas where the fleet of cars travel. By ensuring the vans are properly maintained, a company can also gain maximum service from the vehicles for many long years.
Pro Tip: Reliability is Key
One thing you don’t want is a car that falls apart after minimal usage, so choosing your brand based on a reputation for reliability is a good thing to do. A company car is far more likely to have to do many more miles than a domestic family car, and more than that, it is essential that ‘off the road’ time be kept to a bare minimum. So reliability really is key, and some research in this area will pay dividends.
What More Can the Car Provide?
For many businesses, however, company vehicles are more than just a means of transportation; they are also part of their marketing strategy. A well-branded company vehicle is a very effective way of promoting your business, making an impression on clients, creating good exposure to the public and reinforcing your brand.
Reliability and Money Management
Business professionals can find it difficult to access reliable advice on how to choose the perfect company car, simply because manufacturers and sellers can make confusing claims, which might not always be able to be taken at face value. However, the importance of having a company car revolves around issues such as reliability and money management, and these can really make a difference to a company’s bottom line.
And whether there is a need for one vehicle or a fleet of them, it isn't just the practical issues, such as the capital outlay and running costs that business owners have to consider. The chosen vehicle also has to maximise business efficiency; in other words, be the most appropriate one for the job.
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