As a business owner, if you have a company car then it is important that you know the ins and outs of ownership so that you can get the most out of your vehicle and ensure that it is a valuable asset for your company. There are a few complex areas when it comes to company cars so read on for everything that you need to know.
First, it is worth knowing the different options when it comes to ownership so that you can find the right one for your business and situation.
Buying Outright: Buying outright can work out to be more affordable as there will be no interest and the car will be yours to use as you please, but buying outright can be hugely expensive and interfere with cashflow – you must also factor in depreciation if you ever sell the car.
Hire-Purchase: Hire-purchase involves paying a deposit followed by fixed monthly repayments, after which you can keep the car and use as you please. This can be easier to manage financially but you will have interest and there will be limitations in place during the hire period.
Leasing: Leasing can be a good option for some businesses because you can upgrade every few years and you do not have to worry about depreciation, plus it can be easier to afford over monthly repayments. The major drawback is that there will be limits in place so you could not brand the vehicle and there will be mileage restrictions.
Company car tax is another area which can cause confusion but is important to understand. Tax is paid on a company car if it is used privately (including commuting) but the amount that you pay will depend on a few factors, including fuel, emissions, and the make and model. The cash value of the car is added to your salary and a tax is then taken off the final sum – this could raise your rate of tax if you are close to a threshold so it should always be carefully considered.
You will, of course, want to make sure that you have protection in place in case something were to happen. If your business owns a fleet of vehicles then you can usually arrange fleet insurance with a specialist, but car insurance is not the only type of coverage worth investing in. Having an extended warranty is important if the manufacturer’s warranty has expired because this will provide cover if you encounter any electrical or mechanical faults – these can be hugely expensive which could be a nasty surprise that impacts your business. A warranty from a specialist like Warrantywise will also have a few helpful extras, such as roadside assistance and hire costs covered.
A company car can be a helpful asset and will be essential in some industries, but it is vital that you understand the intricacies of ownership so that you can get the most out of the car and be an intelligent business owner.
Featured image source: Freepik