Top considerations when budgeting for company cars
The total cost of business-owned cars goes beyond the marked price, but a study shows that only one in ten companies account for the total cost of ownership when buying a vehicle. Owning a company car offers many benefits, such as freedom to choose an automobile model and size, ability to sell in the future, and tax benefits. Not to mention, if your business covers a lot of groundwork, investing in the right company car promotes convenience and efficiency.
To experience these benefits, business owners must budget for the purchase of company cars wisely. Knowing how much you need to spend on a business vehicle and the recurring costs your company will incur will help you make the right decision when shopping in the auto market. Read on to learn the top considerations when budgeting for company cars.
Vehicle maintenance fees
Keeping your vehicle in good shape is key to ensuring it functions well throughout the years. Therefore, research how much vehicle maintenance costs in your region. In the UK, for example, the average car owner spends more than £1,290 on maintenance, while in the US, the cost is $0.09 per mile.
When calculating vehicle maintenance costs, factor in the cost of inspecting lights, steering, brakes, and engine. Also, consider how much you’ll pay for replacing oil filters, tires, brake pads, and windshield wipers. While routine maintenance helps your car perform well at all times, breakdowns could occur anytime. With that in mind, find out the cost of towing a car. Towing operators charge rates based on various aspects like type of automobile, distance covered, terrain, and time of day you need towing service, then add towing rates to your maintenance expenses.
Insurance premium rates
A company car is an enormous investment that needs protection against accidents and other risk factors that may have a significant impact on personal finances. To protect your business and personal assets, you’ll need insurance. Insurance premiums add up to the total cost of car ownership. The good news is that insurance rates remain static for quite some time, meaning you won’t incur extra expenses if a mishap occurs.
There are three basic auto insurance coverage options, including third party, fully comprehensive policy, and theft and fire. Note that third party insurance is the minimum cover you can leverage, while a fully comprehensive policy is the highest level coverage you can purchase, as it covers vandalism, natural disasters, and accidental damages.
Gas is the second largest expense after maintenance, considering the average motorist spends about £1,680 for diesel and £1,272 for petrol per year. Since gas prices aren’t fixed, managing your fleet’s fuel expenses can be daunting because costs increase significantly, depending on how often you and your employees drive. To determine the true cost of fuel when budgeting for company cars, take time to evaluate who uses your business cars, where your fleet goes, and how many trips they cover every day. When allocating funds for gas, provide some allowance to cover for emergencies that might require extra fuel.
Buying a company car is a big decision. You’ll need to decide which car mode, size, and safety features suit your business transportation needs. Another important factor you’ll want to consider is the budget. When budgeting for a company vehicle, be sure to factor in the cost of maintenance, gas prices, insurance premiums, and renewal of company car licenses.