Should you use your own car or buy a company vehicle?
If you own a small business that needs a transportation solution to improve its operations, you may be wondering whether buying a company-owned vehicle is a worthwhile investment.
After all, you likely already own your own vehicle, and you might feel that the added expense isn't going to be worth it for you or your business. Nevertheless, there are certain situations in which such a purchase makes perfect sense.
Explore the pluses and minuses of buying a company vehicle below to determine whether it's the right choice for you.
Figuring out your needs
When you are intending to make a vehicle purchase - which can be a sizable expense, either for you personally or your company as a whole - you need to do an appropriate amount of research first.
Consider things like why you plan to buy the vehicle and how you might need to finance that purchase. For instance, if you would only be transporting small, lightweight packages, you likely don't need a large van or ute, which would typically carry a far higher cost than a sedan or compact.
Likewise, you might want to consider whether you want a new vehicle or a preowned one, because the cost of the latter can be significantly less than the former. New vehicles tend to depreciate in value - by as much as 20% - the second they're driven off the lot, so it's important to weigh that factor into your decision, too.
When you're thinking about financing the vehicle, including the interest charges if you take out a loan, you should also think about whether buying makes sense in the first place. In some cases, leasing might be preferable based on your own unique circumstances.
Understanding the tax basics
The biggest thing to keep in mind when making this decision is that it's ultimately a tax consideration. If you buy a car in your own name or that of your company, it has some widely varying tax implications.
For instance, if you own the car personally, you can deduct the business-related expenses associated with it from your liabilities. Typically, you will be able to do this by either maintaining a logbook or claiming the ATO's set rate for claiming a certain amount per kilometre you drive, up to 5,000. However, you would not be able to deduct the Goods and Services Tax on either the purchase of the vehicle or the ongoing costs associated with it - unless you are GST-registered.
In short, if you use the vehicle for personal purposes, you will not be able to deduct those costs, In fact, you may also be subject to the fringe benefits tax - which can increase your tax bill dramatically.
Clearly, this is not a decision that should be made lightly. You will have to crunch the numbers to figure out exactly what your ongoing costs, tax liabilities and so on will end up being for each option.
Every business is different and your needs aren't going to be the same as anyone else's. And because this is likely to require somewhat complicated work, it's probably a good idea to speak with the professionals at Classic Funding Group to help you find the solution that's best for your company's situation.