Technavio’s recently released report has forecast the global commercial vehicle market to grow at a CAGR of 4.97% for the period 2018-2022. Approximately 54 percent of small business owners need to use their vehicles in their business operations. With the move, comes a lot of decisions to make. Will you buy or lease? What are your financing options? What kind of vehicle will be ideal for your business? Each kind of commercial vehicle comes fitted with specific features aimed at different businesses. Whether it is for transporting stock or to be used for employee benefits, deciding whether to purchase a vehicle for your business comes with its own set of circumstances to consider.
Making The Decision
Before considering financing and purchase options, one of the first decisions should be whether your business will benefit from the use of a vehicle. For every asset employed in a business, regardless of size, they’re expected to produce a return. Using the common rule of benefits not exceeding the cost is generally recommended. In addition, check out the list of other factors which you should consider before making a decision to buy a vehicle for your SME.
The Nature Of Your Business
The type of business you own will largely determine whether you need a vehicle and the type of transport required. Consider things like the nature of your business; whether good or service oriented. Most importantly think of the benefits a business vehicle can produce for your business operations. With a vehicle, transport of raw materials and finished goods are made easier. In addition, it allows you to extend your reach and offer delivery services to customers who would not be able to shop in store. This option, if managed correctly can become an additional income stream and a clever marketing strategy.
Cost Versus Benefit
If your business’ income is uncertain, then it may not the right time to buy or lease a vehicle. The main use of a vehicle (or any asset) is to help the business achieve its objectives. Your vehicle should not be a drain on your business’ resources but rather the other way around. When the time comes to replace your vehicle, its disposal costs and residual value should not leave your business worse off than before the purchase.
Plans for The Future
Your growth plan for both immediate and long term can have a significant impact on your decision to purchase a vehicle, particularly for small businesses. Those looking to expand and amp up sales can find that a vehicle is quite useful tool in their plans. Look at future financial prospects since a vehicle comes with maintenance costs such as annual repairs and annual commercial insurance costs. Auto insurance is one of the most important protection policies small business owners should have, regardless of whether you have a dedicated company vehicle or employees use their personal cars. Securing the right business automobile compensation protection can save you hundreds of dollars in expenses each year and ensures you are protected against the correct possible events.
Once you have made your decision, it is time to look at your financial options. For smaller businesses with capital restrictions, leasing can be a great alternative and comes with possible tax advantages. When making a decision, you must also consider the kind of vehicle you intend on purchasing. For example, whether it will be a company car for offsite meetings, transport intended for stock or a customized vehicle. Companies such as Amazon have recently launched delivery leasing programs that enable business owners without logistics experience to add delivery to their operations. With each category comes different costs, including maintenance and insurance costs. Finally, do not neglect to incorporate in the tax implications into your consideration.
Buying or leasing a vehicle through your business is not as straightforward as some may think. It can be a valuable tool in your business’ future. As long as you keep these basic factors in your mind, you will end up making a right decision for your small business and its future.