Buying a car is often intimidating because it involves a huge transaction. If you already have enough money to pay for it outright, you will not worry about it at all. It is daunting when you have to borrow money from a private lender.
Banks can also help you finance your car, but they do not entertain applications from poor credit borrowers. If you are looking for car finance with bad credit, you will likely be tuned down, and as a result, you end up with an only option, and that is a private lender.
However, nowadays, some car dealers also provide financing options, including hire purchase and personal contract purchase. You all know about the essential factors that you should consider while buying a car, but things often become more complicated when you have to buy a car for your business.
Factors to Think Upon When Planning to Buy a Car for Your Business
A business car does not need to be fuel-efficient because you can use it to pick and drop your staff, you may need it for advertisement purposes, or you may need to boost sales volume. There are a lot of factors you need to consider while buying a car for your business. Look at them:
Evaluate the purpose of using your car
If you are looking to buy a car for your business, first off, you should know why you want to use it because it will decide the size of the car.
For instance, if you are running a bakery shop and need a car to move the raw material or carry bakery items to deliver to your customers’ homes, you will need a bakery vehicle.
Not only will you have to carefully decide the size, space and model of your car, but you will also need to think about fuel efficiency. Since you will need it to deliver bakery goods every other day, it is crucial to buy the one that does not use up too much fuel.
Likewise, you will need a cab if you need a car to pick and drop your staff. Before you step into the market, you should know the purpose of buying your car.
Consider your affordability
Once you have got to know what kind of car you need to buy, the next step is to figure out your affordability. You will have to consider fuel and maintenance costs. It must be as minimal as possible. However, it is up to your budget how much you can afford.
Further, it depends on the financing option you are considering. If you have a bad credit rating, you will have a problem financing at affordable interest rates. You will likely get a deal at a high-interest rate.
You will have to carefully consider your budget because the payment term of the debt may last up to at least three years. Within this period, you must not run out of money to meet any of your business expenses. However, if you have started your new business and need to buy a car as immediately as possible, the lender will be sceptical about your affordability.
It is hard for a lender to trust your repaying capacity when you have just started your business. There is no guarantee that your business will be successful. In this scenario, even if you get guaranteed car finance for the unemployed in Ireland, you will likely get the loan at a high-interest rate. At the time of financing, it is crucial to understand how the loan works.
These loans could be risky because they come with a high-interest rate. Make sure that you have enough money to pay off the debt, even if your business does not generate much revenue. Otherwise, you will likely fall into debt. If you fail to repay your debt, your credit score will drop, and you will probably lose your business car.
The repayment term could be up to three years or longer. Make sure that you have anticipated that your business will generate enough revenues that you can meet your debt payments along with regular business expenses.
However, it is always advisable to have a backup if your business fails before it gets off the ground. Once you have financed a car, you will have to pay down the debt whether your business succeeds or not.
In case you fail to pay down the debt, the lender will take back the car to cash it out, and it will ding your credit score as well. There are extra costs as well you should not forget, for instance, insurance.
Be careful about down payment. The higher the car price, the higher the down payment will be. Fuel and maintenance costs are too high for big expensive cars and lower for smaller cars.
Take into account the competition level
You should find out what kind of vehicles your competitors have been using. Though it depends on your business, you should check what your competitors are using as clean as a whistle. It is likely that you may want to overspend money, which may cause you to run out of money down the line.
Though you do not want to look inferior, it does not mean that you will overspend money. Of course, you would like to buy a better vehicle than your competitors, but you would not want to overspend money.
This is why it is crucial to take notice of what your competitors are doing, so you can analyse you are buying a better vehicle and at the same time not overspending money.
Consider your budget
No matter which car you are going to buy a car for your business, you cannot ignore the importance of a budget. If you do not have a budget, you will not buy the car you need for your business. Although you need to identify your business needs at the time of buying your car, you also need to check your buying capacity.
The first thing you need to do to analyse your budget. You may need a bakery car or SUV based on your business needs. If you are paying for it outright, you do not have to think much about it, but if you are looking to finance your business car, you will have to arrange down payment.
Note that the down payment will be worth 10% of the price of your car. You must have money set aside for the down payment. Further, you need to calculate the total cost of the debt.
Note that financing will cost you more than the market price of the car because of the interest rates. You will have to make sure that you would have enough money apart from your car budget, so you do not fail to meet your regular business expenses.
Try buying a heavy vehicle
If you buy a heavy vehicle, you could avail yourself of higher write-offs. For instance, if you buy an SUV or any other heavy car, you will likely be eligible for up to a 50% deduction. However, it is crucial to note that you will be eligible for this deduction only in the first year.
If you have decided to buy a second-hand car for your business, you cannot avail of this facility. It is crucial to note that there are certain restrictions you will have to bear. For instance, the deduction amount cannot be more than the yearly total taxable amount.
Take your accountant’s opinion
Before you set your heart on buying a car for your business, you should consult your accountant about tax implications and write-offs. Your accountant will be able to tell you whether you can afford to buy a new car or not.
Sometimes you may not get any benefit of tax deductions, and hence, in that case, it is wiser to buy a second-hand car. Consulting your accountant can help you make a better decision.
If you are financing your car, it becomes more crucial to analyse whether a new car will be affordable or a second-hand car. Second-hand cars will likely be more affordable in case you are not going to get any advantage of tax benefits from buying a new car.
Even though you can afford to buy a business car, you should do research. It is crucial because it can help you find out a car model at lower prices. You should ask your friends or relatives who can guide you about it.
However, your research should not be limited to the type of car you want to buy. You should also do research about the financing option you are considering to buy your business car.
Apart from auto loans, there are some other alternatives like hire purchase and lease agreements. You can also consider them to buy a business car.
The bottom line
If you are looking to buy a car for your business, you should consider all the above factors. Buying a business car can be pretty expensive. It is crucial to do proper research, understand your needs, make a budget, and consider your affordability.