Adding A Vehicle To Your Business: What You Need To Know

For any business owner, investing in their business means investing in assets that can boost productivity and profits. One of the go-to methods of investment is purchasing a business vehicle. For some organizations, owning a business vehicle is an integral part of providing their service.

For others, it’s an additional revenue stream and means of boosting customer satisfaction or reach. In a 2015 survey by Manta, 54 percent of small business owners said they needed a vehicle to operate their business. Regardless of the reason behind it, adding a vehicle to your business means an increase in the business’ expenses both immediate and long term. Therefore, it should be a decision that is taken with careful thought and consideration.

Making The Choice To Purchase

Before you make the choice to purchase a business vehicle, there are a few questions to be asked. The nature of your business plays a large part in deciding whether a business vehicle would be an essential part of your operations, as do your future plans. As businesses experience different stages of growth, there will be different objectives. If you have business plans to expand in the future that would entail the use of a vehicle then logically, securing one would seem to be the inevitable choice. The nature of the business and planned use would also influence the kind of vehicle and its features that would best suit your business. For instance, businesses looking to offer delivery of perishables would find that temperature-controlled vehicles would be more appropriate.

A business must also be confident that its choice to add a vehicle is a wise move financially for their entity. This means having the financial means to facilitate both the purchase and long term maintenance that comes with a business vehicle. Finally, consider the operation of the vehicle, including the intended driver. For small businesses, this may end up being the business owner. For others, they should be sure they employ a driver and that they can afford to add an additional wage to the payroll monthly. At the end of the day, a business vehicle should not erode profits but facilitate an increase in profits, either through boosted productivity, an added income stream or a wider target market.

Financing The Business Vehicle

For business there are two options available: buy or lease. Lease payments can be wallet-friendly for businesses unable to pay the full purchase price. They are able to pay yearly installments (with added interest) and still retain the use of the vehicle for the agreed period. On the flip side, it works out to be the more expensive option in most cases. Interest is charged on an arrangement like this, which means that organizations end up paying more than the market value of the vehicle.

For those looking to purchase their business car or vehicle outright, they enjoy the benefits of full ownership. These businesses typically have two avenues available to them for purchases. These are by using retained profits or by securing a loan. Any business loan comes with finance charges and terms of conditions. However, interest charges are tax deductible in India and other Asian countries, so it’s worth checking the relevant local tax laws. In some cases, the loan may be a secured business loan, meaning collateral such as other business assets may be used as a guarantee.

Aftercare: Fleet Management

To ensure maximum productivity and efficiency after purchasing a vehicle, a business should take the time to invest in good aftercare and management practices. Collating journeys into straight routes can help to reduce fuel used, and indirectly the expenses incurred relating to the vehicle. Training on efficient driving practices can also help reduce fuel and emission consumption, and reduce the chances of damage to the vehicle and its driver. Reduced liability means reduced costs for a business.

The employment of a vehicle in a business can be an incredible tool in helping it succeed. However, before you make the decision, consider whether it is the right fit for your business and its goals. Go back to your current business and financial plan as you contemplate the place a vehicle has in your business.

Author: Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IITs and IISc. She holds 2 patents and over 20 publications in her name. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.