Home Automotive

Pros and Cons of Buying a Company Vehicle

As a business, you may consider investing in a company vehicle to transport goods or employees. But a car can be a big expense. You need to make sure it fits within your business budget and plans. 

In some cases, it may be better to lease a company car or rely on personal vehicles.

To help you make a more informed decision, here are the pros and cons of buying a company vehicle:

Pros of Buying a Company Car

Let’s start with the advantages of buying a company car:

  1. Commercial auto insurance coverage

Company vehicles can be covered under commercial auto insurance. Policies can cover liability, damage, medical bills, and more. The beauty of this is that it limits personal liability. So in an accident, you (and your insurance) won’t be held personally responsible. 

  1. Tax benefits

Owning a company car comes with many tax benefits. Because the Internal Revenue Service (IRS) considers a company car a business expense, you can deduct the purchase price from your tax bill. But that’s not all. 

You can also deduct the cost of maintenance, repairs, car insurance, gas, car loan interest, and even the car’s depreciation. Over time, you can recover much of the cost of buying a car through tax write-offs.

  1. Valuable employee and customer benefit

A company car can make for an attractive benefit to employees and customers. Employees can benefit from having a dedicated vehicle to make business trips, and customers can benefit from having company staff assist them on-site. This can be more convenient than reimbursing employees for company travel, anyway. 

According to Tiger Okeley at car dealership Oak Motors, “employees who travel a lot don’t want to rely on their personal vehicles or public transit. By assigning them a work vehicle, you can improve employee satisfaction and retention.”

  1. Branding

Having a company vehicle creates an easy way to advertise your brand. Simply put your business name and logo on the car. Then your company vehicle will double as a moving ad while your staff drives it around.

  1. Financing options

To buy a company vehicle, you can leverage your company credit. This could help you get a better deal on financing and improve your company credit for future loans (e.g., for future offices, expensive machinery, and other major expenses).

Cons of Buying a Company Car

Of course, there are some downsides to buying a company car as well:

High upfront cost

Cars aren’t cheap. Whether you pay for one in cash or with a down payment and a loan, you’ll incur some high upfront costs. According to money.com, the average price of a  new car reached a record high of $50,000 earlier this year. That kind of price tag could be a major financial burden on your business, not to mention, it presents a huge opportunity cost. It means you can’t use that money to invest elsewhere in your business. 

Ongoing liability 

Buying a company car is also an ongoing liability for your business. On top of paying for the car itself, your business must pay for car insurance, repairs, maintenance, inspections, gas, title and registration, and more. Plus, the car will only depreciate in value over time, so you won’t be able to make a profit from selling the car later on.

Credit risk

A company car will also put your business credit at risk. If your company suffers a loss, for example, and it cannot make its car payments, it could damage your business’s credit score. This could have a serious impact on your company’s ability to get future loans, especially at good rates.

The Final Verdict

So is getting a company car worth it? That depends on your business’s needs, risk profile, and budget. Evaluate each and calculate the return on investment of a company vehicle and base your decision on that.