All VyStar Offices will be Closed on January 21, 2019, Martin Luther King, Jr. Day
By: Joseph W. Nowland, Senior Vice President Business Services
I know, I know. It’s easy to use your personal vehicle for your business purposes. Why bother with the expense of another vehicle when yours runs just fine?
During the past 20 years, I’ve worked with businesses along the East Coast and have always enjoyed asking, “Why are you still driving your personal vehicle for business reasons?” The majority have responded that they’ve never thought about it.
Business owners worry about sales, marketing, competition, products and services while regularly ignoring some of the smaller things that, when not taken care of, could slow them down or even ruin their organization. Deciding whether or not to use your personal vehicle might fall into the bucket of things to think about later, or it may even be considered a luxury your company can do without. It is extremely important, however, that business owners understand that this decision does have implications for the company and its future success.
Here are some reasons why you should think twice before nixing the idea of getting a company vehicle:
Reason #1: Liability
The primary reason for putting your vehicle in the business’ name is vehicle liability. Many business owners think they’re covered by their personal auto insurance when their vehicle is being used for business purposes. Others think their business insurance fully covers them and their employees if they get into an accident while driving their personal vehicle. Unfortunately, that’s not the case. If you crash into someone while driving your car for business purposes, who do you think could potentially be sued? That’s right, both you and your company. By titling the vehicle in the name of your business, you’re potentially removing your personal liability and moving it to the company. For more information, please contact your insurance professional.
Reason #2: Loss of Insurance Coverage
Some auto insurance companies may deny claims on your personal coverage if the accident occurred while the vehicle was being used by you or an employee for business purposes, leaving you uninsured and personally liable. Again, talk to your insurance carrier.
Reason #3: 100% Financing
Business owners will oftentimes buy a new or used vehicle for the company in their personal name because they can get 100% financing and won’t need to use their startup or other business capital to make a down payment. While there was a time when 100% financing for business vehicles wasn’t available, many financial institutions now offer 100% financing to organizations that have been in operation for a year or longer. Even better, many credit unions will finance or refinance up to 100% of a used business vehicle, allowing you to expand while saving capital for other purposes or investments.
Reason #4: Tax Advantages
Although the personal deductions you can take if you use your personal vehicle for business purposes may seem enticing, you may be leaving some important tax benefits for your company on the table by not titling the vehicle under your business’ name. This is something you need to review every year with your tax advisor to ensure you are capitalizing on all of the options and benefits available to you and the company. Another important thing to consider is whether or not the personal deductions are enough to mitigate the potential liability concerns mentioned above. Oftentimes they’re not. Don’t make this decision on your own; talk to your CPA or your tax advisor and make sure they’re considering all aspects of how the vehicle is being used to ensure you make the best decision for you and your company.
Every situation is different, of course, but these four reasons need to be considered when deciding which vehicle to use in order to run your organization. Periodic consultations with your accountant, insurance agent, credit union, banker or other financial advisor will help you make the choices that are in your best interests. Remember that, as you grow, the decisions you made in the beginning years may have been good for the company then, but they may not be right for your present and future.
*All loans are subject to approval and rate and financing may vary based on the credit history.
**The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. VyStar Credit Union disclaims any liability for decisions you make based on the information provided.