Your small business is growing and you want to take it to the next level. Perhaps that next level is having a car or a truck to make your operations and services easier and more efficient.
Keep in mind that a small business vehicle purchase will be a big investment, even if you go the secondhand route. So it is best that you spend time researching so you can have confidence when making your decision.
Here are some of the important things you should consider.
1. What type of vehicle do you need?
Set aside your desire to buy the latest SUV or a luxury sedan if that’s not what your business needs. Will you be using the vehicle purely for business-related transportation? Then maybe a sub-compact car will be enough for you as it’s cheaper to purchase and maintain.
Will you be carrying around equipment and tools? Then a pickup truck or a van might be a wiser choice. Always start by considering what you will be using the vehicle for and once you narrowed it down then that’s the time to start window shopping.
2. Do you even need a car in the first place?
We understand that there will be times that it will make more sense to use your own car than use public transport. However, will you be doing this on a regular basis? Perhaps even daily? If not, then think about using bus services or hailing a taxi until you’re sure your business can actually afford to buy a car.
3. Did you consult with your accountant?
Next to you, your accountant will be in the best position to fully comprehend your current financial situation and whether you can really afford a new business vehicle. He or she can give you the actual figures to help you make the best purchase decision.
4. How will you pay for the vehicle?
Do you have enough money in the bank to purchase a vehicle in cash? Will you have it financed through a bank or are you going to lease it? Only you can provide the best answer, but in addition to that you should also consider these things:
Chattel mortgage – To explain this as simply as possible, the bank will lend you money so you can purchase the vehicle. Then the bank will take out a mortgage over the vehicle to serve as security. Therefore the bank has the rights to the mortgaged property, in this case your business vehicle, while the loan is outstanding.
Finance leasing – In this agreement, a financier will purchase the vehicle and you will lease it from them, making your monthly payments until you have fully paid the lease. By that time, you will then have the option to either extend your lease or take full ownership.
Commercial hire purchase – You will have full use of the vehicle from day one, however, you are not its owner. It will still be owned by the financier until the time that you have completed paying your loan.
5. Are you prepared for other expenses?
Your expenses do not end at making a small business vehicle purchase as there are still other things to factor in. These include fuel, regular maintenance and repairs, automotive insurance, and even parking fees if you do not have your own garage or parking spot.
Is purchasing a vehicle really the next level that your small business needs right now? It’s to your benefit to first explore all the effects, pros and cons of having your own vehicle. If you’ve weighed it up and there are more advantages, then by all means, make that big decision. However, it’s important to remember, if you’re just starting out with your small business, every dollar that you can save can go a long way to expanding your venture.