When it comes to making a huge purchase like a car for your business, you want to make sure to make the right decision. Business decisions should be based on numbers and getting the best price available. Below are seven tips on how to find and finance your next business vehicle.
1. Do Your Research
After you get a general idea of the type of vehicle you want to finance, do a lot of research to get as much information as you can.
Learn how often a specific model is used as a company car. Look at press and user reviews.
Before talking to a salesperson, you should already have a solid understanding of pricing, options, competitors, and deal offers.
Keep in mind that the goal of a dealership is to make a sale. They do not have your best interest at heart.
2. Such a Deal
Be wary of special deals that sound too good to be true. They usually are. Examine the specifics of any offered deals to see if they are financially beneficial to you.
Include as part of your research the best times of the year to purchase a vehicle. For example, there are specific times of the year when dealerships offer the best bargains, including:
- At the end of the year when dealerships need to meet sales targets
- After a newer model is released because dealers will want to sell off the previous model
- The beginning of a new year when dealers are more likely to negotiate on prices for last year’s models
3. Lease, Loan or Buy?
There are benefits and drawbacks to buying and leasing your next business vehicle. Getting a small business loan is often a good way to go. Consider the issues below to be able to make an informed decision.
- What is the total cost associated with leasing a vehicle, including the initial down payment and the monthly payment? How does this compare to monthly car loan payments and the down payment when purchasing?
- How many miles do you expect to put on the vehicle yearly? Lease agreements include maximum miles per year and impose fees on mileage over the limit.
- If you will be using the vehicle every day and expect to go over the lease mileage maximum, you could be paying a lot of money in overages at the end of the lease.
Leasing is a better option than buying when you:
- Only need a vehicle for a short time
- Plan to put low mileage on the vehicle
- Don’t have a credit score high enough to get a loan for a purchase
Buying is the preferable option to leasing when you:
- Drive the car extensively and don’t want a mileage limit
- Have the money available to buy the vehicle outright or via financed monthly payments
- Can get a car loan because your credit score is good
4. Understand the Different Price Points
When researching and negotiating prices, it is vital to understand the different types of price points and what they mean.
Manufacturer’s Suggested Retail Price (MSRP)
This is the suggested published price from the automaker that is listed on a sticker and posted on the vehicle.
MSRP also details markups, prep fees, and dealer-installed options. Because it is only suggested, dealerships can sell a vehicle for a higher or lower price than the MSRP.
Base Price
The base price refers to the cost of a vehicle without any additional options. It includes the manufacturer’s warranty and the standard equipment.
Destination charges and other fees are excluded. The base price is the one most often seen on most car reviews and pricing websites and guides
Total MSRP
Also known as the sticker price, the total MSRP includes the base price in addition to option-package discounts, additional options, and the destination charge.
Try to negotiate a better price than what’s on the sticker. Unless the vehicle is in high demand, you should get a better deal.
5. New, Used, or Certified?
Should you buy new, used, or certified? It should depend upon the purpose of your business vehicle.
The most important factors are your reason for needing a car and how long you want to keep it
A new car will cost more, could have fancy features, and be more reliable. It will also depreciate up to 20% as soon as you take it off the dealership lot.
If you need to use a business vehicle for the long-term, it’s better to purchase a car that has high residual value.
For businesses who only need a vehicle for infrequent use, purchasing a used car is a better option. Or, consider purchasing a certified pre-owned (CPO) vehicle for better reliability.
CPO’s undergo full inspections and are repaired when necessary as specified by the manufacturer.
They usually cost more than used vehicles but also come with roadside assistance and other warranties.
6. Be Wary of Variable Rates
Although starting a loan with a lower rate is enticing, it can end up hurting you in the long run.
A variable-rate loan is based on the index or prime rate and will change over time.
If interest rates go way up, so will your loan rate. The longer your term of the loan, the riskier it becomes.
It is safer to secure a fixed rate that won’t change so you can budget a known monthly cost into your spending.
7. Keep Accurate Records
Purchasing and using a business vehicle does have tax benefits. You can deduct for mileage when driving to job site visits, client meetings, and business trips or errands.
You can write off part of the purchase price of a business vehicle. However, there may be limits. Be sure to keep receipts and accurate and complete records for your accountant when it comes time to file your taxes, including:
- Car loan interest costs
- Running costs
- Gas
- Insurance
- Registration
Finding the best business vehicle and choosing the most suitable financing options depends upon a range of factors, including how you will use the car, your financial situation, and taxation needs.
Feature Image, Wikimedia, CC.
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