Buying a vehicle for commercial purposes is a must for almost any business. It will serve as a reliable means of transportation. Still, the purchase can also help expand your business, offer additional tax deductions, and may even save you on auto insurance. As with any business decision, however, there are often several questions about how to buy a car in your business name. If not done correctly or with enough forethought, that vehicle could bring more than a few drawbacks.
How to Buy a Car for Your Business
How to buy a car for your business is somewhat similar to how you'd buy a car for personal purposes. You must build up your business credit if you're not buying the vehicle outright. This can take up to two years, so you may need to consider other financing options or purchasing a business vehicle—a corporate vehicle lease, for example, may be a viable alternative.
If your business already has a "good" credit score, then it's just a matter of finding a dealership that specializes in commercial sales. It'll make the purchase much easier. Also, take the time to determine what you might need in a commercial vehicle beyond the ticket price to ensure it suits all your business requirements. For instance, a funeral home will want to ensure that the rear compartment will accommodate the vast majority of caskets.
Once you've decided on a vehicle, the time has come to decide whether you may want to secure your auto loan from a bank or credit union or accept one from the dealership. Again, if your business's credit score isn't good, you may need to sign a guarantee that you, as the business owner, will make good on the loan if the business defaults on the financing. In other words, you will pay off the loan from your resources.
The process then continues much like it would under any other circumstances. Insure the vehicle for commercial use and put the car under the business's name.
Buy Car with LLC
Buying a car with an LLC is no different than buying one as a business. It all starts with building up your business credit and then working with a specialty dealership, finding a vehicle that meets all business needs, and securing a loan for the purchase — that is if you're not buying it outright. Once the purchase has been made, get commercial auto insurance and register the vehicle under the name of your business.
Advantages of Buying a Company Vehicle
As mentioned, one of the biggest advantages of buying a company vehicle is the tax benefits. The cost of the purchase — or a lease, for that matter — can be deducted from your tax obligations. The same can be said for any repairs or maintenance required of the vehicle and travel expenses related to its use. Work with a tax professional to make the most of your tax deductions.
Another of the advantages of a company vehicle will involve liability. If you or someone who works for your business were to get in an accident, it would be covered by the commercial auto insurance policy, not your insurance. The insurance payments will likely go up, but that, too, would be tax-deductible.
Disadvantages of Buying a Company Vehicle
The biggest disadvantage of buying a company vehicle will be the expense. There's no getting around that. Vehicles, especially specialty vehicles, come with a large ticket price. If you plan on purchasing it outright, that's a lot of capital from the business.
Financing the purchase can offset the upfront expense, but you'll be making monthly payments, which can be quite a liability for a business with varied revenue. A slow month could make meeting all your debt obligations, including auto payments, difficult.
This isn't to say you shouldn't buy a vehicle for your business. It's just something to consider when deciding whether to finance the purchase.
If you'd like to learn more about how to buy a car in your business name, the team at Shields Professional Vehicles would be more than happy to answer your questions or help find a hearse that will meet your business's distinct needs. Contact us today.