How You Should Buy a Car for Your Business
If you’re only looking to buy a car for business use, then there are a number of tax breaks that you can get, depending on how you buy the vehicle. As such, how you buy your car is important. There are a number of ways that you can buy a car for your business. Here, we look at the top three.
Buying the Car Outright
Sadly, the easiest way of buying a car for a business is usually the least accessible for most: buying it outright with cash.
If you own a business with large sums of money in its account, then buying the car outright is probably the best option, as it means that you’ll only be paying the sticker price, with no extra fees and charges. Plus, by buying outright, you’ll probably be able to negotiate a discount; especially if you’re not part-exchanging.
However, if we’re being realistic, very few SMEs have tens of thousands of pounds in the bank. As a result, many choose one of two other options: leasing or financing. Let’s take a look at both of these options in more detail.
Leasing is like renting a house. You don’t own the item in question, but you effectively rent it for the long term and then give it back at the end of an agreed period.
With leasing, you typically pay a small fee upfront (this is generally around three months of the contract), plus a monthly fee. Due to the fact that you don’t own the vehicle at the end of the contract, these monthly payments are traditionally low because you don’t own the vehicle, and this means that more expensive cars come into your price range as a result.
However, there are downsides, too. For example, you can be tied into the agreement for a lengthy term, and you’re also usually tied into a certain mileage, which can be problematic if you need to use the car more frequently. You can add additional miles to your contract, but this is usually expensive.
If you’d like to own the vehicle outright but don’t have the cash to buy it, then car finance is a great option.
With car finance, you pay a deposit of your choosing with the garage and then split the rest of the payment over a duration of your choosing, too. This generally ranges between one year and five years.
As you’d expect, because you pay in manageable monthly payments rather than upfront, you are charged interest, making it more expensive than buying outright. However, you do own the car at the end of it.
To conclude, there are a number of great options if you’re looking to buy a car for your business, so consider all of the above carefully before taking the plunge.
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