There are a variety of businesses and companies out there who have it in their best interests to own and operate their own vehicles. Companies that frequently transport items from one destination to another, for example, can save a lot on operating costs and expenses by owning their own vehicles outright than leasing them or contracting this cost out to a third-party.
For new businesses, starting this fleet (even if it is just one or two company-owned vehicles in the beginning) can be a challenge, but by following this guide you can better understand the basics and start your financial planning off right:
What is a Company Fleet?
A company fleet, or in more realistic terms, a company car, is a vehicle that is owned and operated by a company for their business use. While, yes, you can use your own vehicle and have your employees use their own vehicles, this isn’t always the best option. If you need special tasks accomplished – for example, moving heavy machinery or raw materials – then you are going to need to invest in your own vehicles.#
What you need will depend on who you are as a company. A plumber agency could do just fine with a series of standard flat-bed trucks you can pick up at the dealership down the road, whereas more heavy duty-vehicles will need a specialist dealership to acquire them.
Acquiring Vehicles for Your Fleet
Acquiring vehicles for your fleet will be no cheap task. Even if you plan on starting small with one or two company vehicles, this still means debt and ongoing costs you will need to account for in your books. You will also need to ensure that you follow all the rules and regulations based on where you live. For example, depending on your fleet or purpose, you will likely need to get your USDOT number and authority, if you plan on operating between different states. You might also need International Fuel Tax Agreement decals as well as protect your fleet from any legal complications.
New Vs. Used
There are very few instances where new companies will ever want to dish out for a new car unless the goal is to impress clients. Perhaps you are a limo service, for example, and the best way to get customers and clients to turn to you again and again is to splurge on a series of incredibly beautiful and new vehicles that your customers will appreciate being in.
On the other hand, if you are lucky you can still acquire these newer models, but in used format. What this means is that, for whatever reason, the original owner had to sell their vehicle well before even the warranty itself was up. For those who want a great deal on a new model, this is the best option to choose. The only downside is that it is not possible to plan for what you will find, so you will need to keep an eye out for great deals like this before someone else can snatch it up.
The reason this works is because all vehicles have a very high depreciation value. You would never get all your money back if you sold it the very next day. Therefore, a year-old vehicle could offer you great savings, and yet still be new enough to impress clients and function perfectly, all while under warranty.
Buy Vs. Leased
Leased is a great option is the cost of the vehicle is too high on its own (for example, with large transportation trucks) or if you need to impress clients on a regular basis. There may be certain regulations, though, stopping you from using leased vehicles for work-related occasions, so be sure to check beforehand.
Buying the vehicle, however, is far more cost-effective in the long run if you plan on owning and managing said vehicle for years longer than the lease would serve. You also get the added benefit of a trade-in value at the end of its lifespan with you.
How Much Should You Have Saved for the Down Payment?
As a business, you could probably get away with paying less of a down payment than traditional vehicle owners. Just remember to go in with a business plan on how you intend to afford all the costs and repairs in your operations.
Tips on How to Factor in Cost
No matter what vehicle you operate, you absolutely must factor in the cost before you commit to it. If you cannot afford it now, you will only put yourself further into debt in the long run, if not go bankrupt as a company altogether. Prioritize financial planning from the start so that your vehicles can help your company, not be a money pit.
1. Calculate Your Vehicle Repayments
In business, it is irresponsible to jump into any sort of debt without first planning accordingly what you can afford. Newer or smaller businesses, in particular, should never go and buy the first vehicle they see. Instead, they need to factor in the cost of owning/leasing and maintaining your vehicle into your costs.
A great way to factor in this budget is to use the car loan calculator on autogravity.com as it can factor in a variety of different variables such as down payment contribution, taxes, APR, and even how long you wish your loan to be. That way you can prepare your budgeting ahead of time.
2. Get Pre-Approved for Your Loan
The best way to have negotiating power is to be pre-approved for a loan. Going in with proof that you can make all the repayments and have a solid business plan can help you get the loan you need.
3. Know How Negotiate
Always negotiate down the price of the vehicle. There are several ways to do this, including choosing the right dealership, going during the end of a quarter or fiscal year, and knowing the MSRP among other factors. You also need to be prepared to walk away
The Importance of the Right Fleet Insurance
Owning and operating a fleet is expensive, and it can also be dangerous. You need to have specialty insurance in order to operate and protect your business from a variety of challenges, from property damage to liability.
Whether you own and operate one vehicle or ten doesn’t matter, so long as you appropriately plan for how you intend to pay for and afford the repayments. Once you do that, you can succeed and grow as a company.