The first time you choose a car for your business it can be really overwhelming – there are so many choices to make, so the sheer variety of options can seem baffling. Perhaps most importantly you also want to make sure you’re getting the right price!
So, here’s a guide to help you narrow down your options and make the right choice for your first business car.
First Decisions
The first few decisions you need to make should be fairly straightforward, but will affect your budget going forward.
You should first take a close look at the needs of your business, so that the vehicle you end up choosing will maximize efficiency. Really the most fundamental question to answer is whether you’re looking for a single car or a fleet. Sure, more vehicles could potentially mean increased efficiency or productivity, but it would also require more initial capital outlay, as well as an increased ongoing financial commitment – so you’ll need to weigh up these opposing factors and get the balance right.
In the past companies opted for using company cars as a reward for their most valuable employees. However, in a small business this is not usually the best way of using valuable resources. Why?
Well, here’s why: In buying a car for an employee, a small business will also take on all the risks of ownership such as depreciation, repairs, servicing and maintenance costs. So to make these risks worthwhile, it’s vital that the car is providing optimum added value to the business rather than representing a simple reward.
Lease or Buy?
Once you’ve made these initial decisions, you need to firm up your budget so you know exactly what you’ve got to spend.
Fixed costs will be easiest to manage, so with this in mind it’s usually a good idea to go for a car no more than three years old – otherwise maintenance costs can increase more than you might expect in a relatively short period of time.
Leasing is also a great choice to ensure costs remain fixed, as while they do require a small initial outlay the monthly cost will remain fixed during the period of the lease. This approach can also be much more tax efficient as a small business could potentially claim back 100% of the VAT paid if the vehicle is used solely for business purposes. Leasing also allows the business owner to avoid being saddled with a depreciating asset.
So, to answer the all-important question, we unfortunately will say a cliche answer – it depends.
If your business is involved in plenty of receivables, then you may not have the luxury of a budget that allows you to buy a car. With that said, leasing a car might be more beneficial for you.
On the other hand, if you have room in your budget, you may want to consider buying a car, because all in all, the total price is lower than leasing a car.
So, it depends on your situation and budgeting policies – the choice is yours.
Takeaway
Before you decide on anything, you need to look closely at your finances, and see whether your business can afford buying or leasing a car. If you asked me, I would personally answer that I prefer leasing a car than buying one at a fixed cost.
No worries about choices; companies like Lease Car have a huge range of vehicles available in a range of sizes and fuel options to suit your business, and your budget.
Good luck in your endeavour!