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The Business of a Business Car: What You Should Know About Owning a Company Car

Are you looking to buy a company car but not sure whether it’s a savvy move?

Perhaps all your closest competitors have company cars and you want your business to measure up. Or a car will help make some business tasks easier, such as transporting merchandise.

Regardless of the reason behind your desire to own a company car, one thing is clear — an automobile is a big ticket item. You must know how it will affect your bottom line.

Buckle up and keep reading to learn about the business of owning a business car.

Buy or Lease?

When you’re in the market for a business car, you have two options: buy or lease.

To determine the right option for your business, it’s vital to get a good handle on the upsides and downsides of both options.


Buying is the most preferred option of acquiring a company vehicle, and it’s easy to see why.

When you purchase a car, you have 100 percent of ownership. You can customize it however you please and being a business asset, it adds to your business’ market valuation.

On the downside, the large capital outlay required to buy a car can set back your business’ finances. You have the option to finance the purchase through a loan, but this is usually costlier because of the interest you’ll have to pay.

An automobile also requires ongoing maintenance and repairs, and it’s a depreciating asset.


On the other hand, leasing enables you to drive a car without owning it.

You pay an initial deposit to the leasing company, followed by monthly payments throughout the term of the lease. Depending on terms of the lease, you might not need to worry about the car’s maintenance.

However, leased cars usually have mileage restrictions and the leaser can prohibit extensive customization. You could also incur additional charges if you terminate the lease before its expiry.

Overall, leasing is the cheaper alternative. It’s ideal for businesses running on a tight budget.

Driving a Business Car

Once the car is at your parking space, you have another decision to make.

Do you want to hire a company driver or you will drive the car yourself? You could also assign it to an employee.

Your choice will depend on the nature of your business.

If you’re a solo entrepreneur, for instance, it’s obvious you’ll assign the car to yourself. But if your business has several employees, you could assign it to an employee who is often on the road, or if your budget allows, you can hire a company driver.

Another factor to consider is your need to track business expenses.

With a driver on staff, it’s far easier to track expenses because you only need to instruct the driver to only use the car for business duties.

But when it’s you or your employee behind the wheel, it can be challenging to separate business travel from personal travel. Think of an employee who, on a trip to see a client, decides to stop somewhere along the way for a quick dental checkup.

The Tax Implications of Owning a Business Car

The IRS allows you to deduct the costs associated with operating the car for business use. But what constitutes business use? This involves activities such as:

  • Driving between work sites
  • Driving to meet clients
  • Driving to attending a business meeting, seminar or conference

There are also other instances where your usage of the company car might be eligible for tax deduction. For example, if you use the car for a charitable purpose, such as providing transportation services to a charitable organization, you can deduct the incurred costs.

Expenses that don’t count as business use and thus not tax deductible include driving from your residence to work and vice versa and driving from work to attend to a personal matter.

Even though owning a company car enables your business to make tax deductions, it all depends on your ability to track businesses travel. As such, keep accurate records of all the relevant documentation, including parking and toll charge receipts.

Business Car Insurance 

Like all automobiles, company cars must have a minimum auto insurance coverage. However, this insurance is hardly enough for a business car.

If your business car has standard insurance and the driver gets involved in an accident when on business travel, it’s likely the insurance company will void your claim. And if the driver was at fault, the other party could sue your business to recover compensation for any damages and losses. On that note, be sure to learn how to dispute a car accident fault.

To protect your asset and limit your liability, purchase adequate business car insurance. Plus, ensure your drivers are aware of the terms of coverage so that they know what they’re getting into when using a company car for personal travel.

The Economics of Car Aesthetics and Brand Perception

Beyond taking you from point A to B, company cars have the power to build your brand.

Let’ say your business is a luxury travel agency. What message would you be sending if your company cars are low end to medium-range models? You want to protect your brand image by cruising around in luxury vehicles, no doubt.

However, luxury cars have hefty price tags and keeping them on the road is no cheap task either.

This is why you must strike a balance between protecting your company’s image and meeting its transportation needs. Don’t buy expensive fuel guzzlers if your company doesn’t have deep pockets, but also ensure your cars are on par with your brand’s image.

Business Cars: A Valuable Addition to Your Company

From making your business travel more convenient to the tax savings, you’ve every reason to own a business car. But they cost money to acquire and operate, and if you’re not calculative, you risk making costly blunders that can sink your business.

Luckily, we’ve fleshed out what it takes to own a company car. You’re now in a better position to make an informed decision.

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