12 Steps for Buying a Car for Business and What to Avoid
Buying the right company car is just a few steps away. Start by assessing your needs, setting a budget, researching, test-driving, and more. And don’t forget to insure your new company car once the sale is complete.
Tanveen VohraManager of Content and Communications
Property and casualty insurance specialist
4+ years creating insurance content
Tanveen manages Insurify's data insights, annual home and auto insurance reports, and media communications. She’s regularly featured in media interviews on insurance topics.
John leads Insurify’s copy desk, helping ensure the accuracy and readability of Insurify’s content. He’s a licensed agent specializing in home and car insurance topics.
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You work hard to run your business and achieve your goals. So, when it comes to transportation, you need something that works for you.
Buying a car for business is common for small and large businesses. Whether you need a delivery vehicle or a company car to get you to your meetings, a business car may prove a wise investment.
If you’re considering a business car, you’re in the right place. With our 12-step guide, you can make the most of your investment and avoid the common pitfalls of purchasing a car.
Key Takeaways
Buying a car for business can be a smart way to reinvest your profits and secure reliable transportation for business-related tasks.
In 12 steps, you can assess your company’s needs, research vehicles, and find the perfect company car.
How to buy a business car in 12 steps
A car is a significant purchase, so you don’t want to act impulsively. Here’s what you need to know about buying a car for your company.
1. Assess the needs of the business
First and foremost, consider the purpose of this car and who will use it.
Consider questions such as:
Will you make deliveries with this car?
Are you the only person who will drive this car?
How often will it be used?
Do you need substantial cargo space?
Will there be passengers in the car?
Are you driving long distances in this car?
How do you want your brand to be perceived?
As you answer these questions, you’ll narrow down your needs. For example, if you’re planning to travel long distances in this car, you’ll want something fuel-efficient and comfortable.
2. Consider legal requirements
When you’re buying a car for your business, it’s always important to consider any legal requirements or potential issues that may arise. From business entity considerations to insurance requirements, you have various topics to explore before committing to purchasing a business car.
Answer the following legal questions before proceeding:
What is your business entity? How does it affect owning assets such as a vehicle?
If buying the car outright, what name will be on the title?
How much insurance will you need for this vehicle?
Will you need commercial insurance for this car?
Do you or your employees need special licensing to operate the vehicle?
If your employees use the car, will you hold them to a contract or use policy? If so, what will it say?
3. Determine whether you’re buying new or used
You’ve determined the car’s use and considered any legal requirements. Now, you need to weigh the pros and cons of buying a new or used vehicle.
Whether you buy new or used often boils down to how much you can afford. However, both options have their own financial benefits. Of course, a used car is less expensive up front. Yet a new car could save you in maintenance costs.
Other points to consider might include:
Depreciation: New cars depreciate as soon as you drive off the lot, while a used car only loses value from use.
Warranty: New cars often come with more extensive warranties.
Safety: Newer cars often have better safety features.
Fuel efficiency: New cars have better fuel-efficiency technology.
Insurance cost: New and more expensive cars often cost more to insure unless you’re considering a rebuilt title used car. In this case, insurance premiums may be higher.
4. Set a budget
Regardless of whether you’re buying a car for yourself or your business, setting a budget is one of the most important steps in any purchasing decision.
Down payments and monthly payments are the two first factors you’ll look at, but don’t forget to budget for other items, such as taxes, dealership fees, registration fees, and ongoing costs.
Would you like to pay for the car outright in cash, or would you like to explore financing options?
Buying the car outright can save you quite a bit of money in interest. However, making such a large purchase outright may not be in the company’s best interest.
Most large dealerships offer in-house financing, but you may want to compare rates with other financial institutions to see which one will offer you the best deal.
Most car loans have a term of 60 months (five years). If you choose to go with this option, ensure you won’t face a penalty for paying off the car early should you choose to do so.
6. Research, research, research
Before heading to the dealership to test-drive cars, you must research which car models you’re interested in.
Consider these questions to help narrow your search:
Do you want a sedan, SUV, van, or truck?
Which car manufacturers do you trust?
Which key features are you looking for?
Is fuel efficiency important to you?
What are some must-have safety features?
With the answers to these questions, you can decide which cars pique your interest and what you’d like to test-drive.
For example, let’s assume you want a midsize sedan that’s fuel-efficient and compatible with Android Auto and Apple CarPlay. You’d also like blind-spot sensors and trust brands like Toyota, Hyundai, and Honda.
With this information, you might test-drive a Toyota Prius, Hyundai Sonata, and Honda Accord.
7. Consider resale value
If you choose to finance or own the car, you should always consider the resale value during the research phase. Even though you’re not planning to sell anytime soon, you should never purchase a car that will have little to no value after a few years of driving. Doing so will make it difficult to trade in or sell the vehicle when you’re ready to upgrade.
Always consider the brand’s reputation and how quickly the type of car you want will depreciate over time.
8. Test-drive multiple cars
You might go into the dealership ready to buy a certain make and model. However, refusing to test-drive various cars could lead to a purchase that you’re not completely satisfied with.
Instead, be open to different brands and models that fit your requirements, and try out multiple cars.
Test-driving various models allows you to:
Assess comfort levels
Compare and contrast various brands
Confirm your wants and needs
Define any deal breakers
Ultimately find the best fit
You might even decide to try multiple dealerships until you find the perfect fit. A car is a significant purchase, so don’t be afraid to keep looking until you’re sure that you and your employees are completely satisfied.
9. Narrow down your choices
Let’s say you test-drive four cars and end up liking three of them. You assume you’d be happy with any one of the three, but you want the best.
To avoid buyer’s remorse, do further research and weigh the pros and cons of each model separately. Revisit the set of questions that helped you decide which models to test-drive. How do these cars stack up?
For further help, consider the following:
Which car best reflects the image you want your company to reflect?
Which car has the best tech features?
Which car has the best fuel economy?
Which car provides the most comfort?
Which car has the right amount of passenger and cargo space?
Which car has the best reputation?
Which car has the best warranty?
Which car needs the least upgrades (if any)?
Eventually, you’ll notice a pattern of which car is most suitable for your company’s needs, and this will lead you to the right decision.
10. Conduct a thorough inspection
Inspections are especially important for previously owned vehicles. If you’re buying a used vehicle from a dealership, they should inspect the car for damage, leaks, rust, and anything that could compromise the engine’s integrity. They must also check the tires, brakes, transmission, belts, and fluid levels.
When purchasing from a private party, you’ll likely have to pay for an expert to conduct a full inspection.
Study the vehicle history report to look for any potential problems, such as hidden damage, and determine how many people have previously owned the car.
Lastly, don’t forget to test out all the features for yourself. Ensure the radio, Bluetooth, charging ports, seat heaters, and other add-ons are in working order and function as if new.
11. Negotiate to finalize the deal
Before signing anything, check to make sure you’re getting the best possible deal. If you feel you have room for negotiation, there’s no harm in asking.
Here are some tips for negotiating a better car price:
Compare the prices of the same car elsewhere and see if they’re willing to match the price.
Double- and triple-check any fees they might be charging you. If you feel any fees are unfair, see if they might be willing to lower or waive them.
Maintain a calm and polite attitude. Salespersons are more willing to work with those who show them mutual respect.
Be prepared to walk away if the price seems unreasonable.
Offer up a fair price and see if they’re willing to meet you halfway.
Ask them if they’re willing to throw in some small upgrades if coming down in price isn’t an option. Small upgrades could include weatherproof car mats, upgraded GPS, and more.
When you’re satisfied with the terms and conditions, you can finalize the deal by submitting your down payment (cash, check, debit, or cashier’s check is often accepted) and signing the paperwork.
12. Compare car insurance quotes
You’ve got the keys to the car, but you’re not done just yet. When you buy a car, you have to get insurance.
The easiest way to get an insurance policy is by shopping online and comparing quotes instantly to find the best match.
Cheapest recent rates
Drivers using Insurify have found quotes as cheap as $34/mo for liability only and $44/mo for full coverage.
*Quotes generated for Insurify users within the last 10 days. Last updated on April 25, 2024
Rates shown are real-time Insurify user quotes from 100+ insurance companies and Quadrant Information Services data. Insurify’s algorithm excludes anomalous quotes and anonymizes personal details, then displays refined quotes by price, date, and insurer popularity up to 10 days ago from April 25, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.
*Quotes generated for Insurify users within the last 10 days. Last updated on April 25, 2024
Rates shown are real-time Insurify user quotes from 100+ insurance companies and Quadrant Information Services data. Insurify’s algorithm excludes anomalous quotes and anonymizes personal details, then displays refined quotes by price, date, and insurer popularity up to 10 days ago from April 25, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.
Here’s a step-by-step guide on shopping for insurance online:
Fill out some starting information, such as why you’re shopping for car insurance and your ZIP code.
Next, you’ll fill out some information about the car, its uses, and how often someone will drive it.
Finally, you’ll fill out personal information, such as your gender, credit score, driver’s license history, level of education, marital status, how much coverage you need, and previous insurance experiences.
You’ll then fill out a few last questions about your place of residence and where you’ll park the car overnight.
Once everything is submitted, the comparison tool will provide you with various insurance companies and their respective quotes that best fit your needs.
At this stage, you can customize your selection even further by changing your liability coverage, the number of drivers, and other essential factors. The tool will adjust automatically to find you the best insurers.
While it may be tempting to pick the top insurer on the list, do your research to determine if it’s the ideal insurer for you.
Now that you’ve decided on an insurer, you can purchase insurance online through its website or contact an insurance agent over the phone.
Once you’ve agreed to the policy and its price, you’ll need to sign the policy and submit a payment for the insurance to kick in. Insurance will be valid at the time of purchase unless otherwise noted within the policy.
Should you buy a car for your business?
Buying a car for business is a great use of funds for many, but it may not be for everyone. Here’s more on how to determine when a company car is right for you.
Pros
Maintain a professional image
Deduct depreciation from business income
Reliable transport
Cons
Added cost to your company’s cash flow
Cost of maintenance, insurance, yearly registration, and other ongoing costs
Increased business liability
When you should buy a business car
It can be difficult to determine whether a car is worth the added expense to the company. Yet buying a car for business will prove valuable in multiple situations.
You should consider a company car if:
You need a car for delivery or commercial purposes.
Your company can afford the up-front and ongoing costs.
Your company can take advantage of the business tax benefits. Please speak to a tax expert for the most accurate information on benefits associated with car ownership.
You need reliable and frequent transportation for work-related matters.
Purchasing a car is more affordable than renting or leasing in the long run.
You want to use the car for advertising purposes.
When you shouldn’t buy a business car
If you fit into one or multiple of the following situations, purchasing a company car may not be right for you now.
You should not purchase a company car if:
The costs will strain your business’s cash flow.
You can’t take advantage of the potential tax benefits.
You won’t use the car enough to justify its purchase.
Commuting is just as easy or easier without a company car.
The business can’t afford maintenance and other costs.
What to avoid when buying a car for business
Whether you’re purchasing a personal car or one for business, it’s imperative to avoid these common mistakes.
Overextending your budget
A common mistake made by many car shoppers is failing to stick to their budget. The last thing you want is to create a financial strain on your company in exchange for a car. Stick to your budget, even if it means compromising on a few features.
Failing to do your homework
We encourage doing your research during various parts of the car purchase process. This is absolutely essential and can help prevent unfortunate circumstances, like paying a high price for an unreliable car.
When shopping for a car, you must:
Examine the vehicle’s history
Check maintenance records and assess the car’s overall condition
Conduct an expert inspection
Determine what you believe is a fair price for the car
Research brand reputation
Stick to what you need from your car
Not considering ongoing costs
It’s easy to get caught up in the up-front cost and forget about the financial responsibilities that come with a car. Don’t forget to consider the ongoing costs, such as maintenance, fuel, yearly registration fees, repairs, depreciation, and insurance.
Finding affordable insurance with the right coverage is only a few clicks away. By requesting quotes and shopping online, you can quickly compare and contrast dozens of policies that fit your business’s needs.
Tanveen VohraManager of Content and Communications
Tanveen Vohra is an editorial manager at Insurify specializing in writing about property and casualty insurance, focusing on market and pricing trends in home and auto insurance. Through her work, she helps consumers better understand the components of their insurance policies so they can make smarter purchase decisions. She received a bachelor's degree from SUNY Buffalo. You can connect with her on LinkedIn.
John leads Insurify’s copy desk, helping ensure the accuracy and readability of Insurify’s content. He’s a licensed agent specializing in home and car insurance topics.
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