You need vehicles for business use. But you might consider buying or leasing one through your company rather than as an individual. Basically, this just means your business is officially named as the owner or lessee of the vehicle.
Overall, the process of buying or leasing a vehicle through your business looks fairly similar to buying or leasing a vehicle as an individual. But you still need to find a dealer. And select a model that works for your specific needs and secure financing. However, look for some variances when buying.
How to Lease a Car Through Your Business
Take a look at what the process looks like.
Work With a Dealer That Offers Commercial Service
Different manufacturers offer different programs and terminologies for this. But basically you need to find a dealership officially authorized to work with commercial customers. Ford calls this type of dealership a Commercial Vehicle Center. Consider Village Ford in Dearborn, Mich. for example.
Village Ford General Manager Bob Wheat said in a phone interview with Small Business Trends, “As a CVC dealer, we have access to different programs than other dealers, we can offer commercial financing and it’s just a much easier process.”
This doesn’t necessarily mean the dealership only works with commercial vehicles. Village Ford offers options for both individuals and businesses. But they employ a dedicated commercial salesperson and a few other team members specifically authorized to work with commercial customers.
Consider Customized Solutions
The type of vehicle or vehicles that you choose can vary widely depending on your specific needs. If you’re just looking for a simple passenger vehicle, then this part of the process may be fairly similar to buying or leasing a car for personal use. You could simple find an in-stock option and then work with the dealer to fine-tune the details.
However, for businesses that need fleet vehicles, heavy duty options or cars with very specific features, you might instead work with a dealer to create a customized solution. To do this, you’ll first need to have a very clear idea of what your needs are. You may also have better luck getting the ideal vehicle if you give yourself some time to shop around and work with a dealer on customization options, rather than desperately searching for something that you can drive off the lot in a single day.
Wheat also emphasized the importance of working with a dealer that really understands the needs of commercial customers. They can help to ensure that your vehicle choice is set up to handle your specific hauling needs, size requirements and budgetary concerns.
Choose Between Buying and Leasing
Businesses have the option of either buying or leasing certain commercial vehicles. When you buy, you often make slightly higher payments. But they go toward paying off the vehicle. So once you’ve paid it off, you own the vehicle outright and it becomes an asset for your business. When you lease, you don’t ever actually own the vehicle. You simply make payments through a period, usually of about three years. Then you turn the car in at the end of that period or have the option to purchase it. The payments are often a bit lower for leases, but there are also mileage and availability considerations to make.
One option isn’t automatically better than the other, according to Wheat. You simply have to evaluate your business’s situation and what your exact vehicle needs are to determine which one is a better fit.
He says, “If you only want a vehicle for about three years and you don’t want to take cash out of your business to put a lot of money down, then you should probably think about leasing. It reserves cash and doesn’t tie up your credit line. You’re basically opting for planned obsolescence in exchange for a new vehicle. But if you’re looking for a vehicle that’s highly specialized for your business and you want to drive it until the wheels fall off, those people should think about buying.”
Bring Your Business’s Financial Documents
You should have a copy of your latest balance sheet and any other financial documents that can help you demonstrate your credit worthiness. You’ll need to establish a relationship with a lending institution. So they’ll want to look at your business’s cash flow, revenue, debts and any other elements that could impact your ability to re-pay your car loan or make lease payments on time.
Be Prepared to Guarantee the Loan Personally
If your business does not have enough credit to qualify for a loan or lease payment plan that fits your needs, you may need to guarantee the loan on a personal level. You would still be allowed to buy or lease the vehicle or vehicles through your business officially. But you would also be personally responsible if you’re not able to make the payments.
Work with your dealership’s finance department to come up with the terms that work best for you. This may not be ideal for some business owners. But especially for new or unestablished businesses, it’s often your only option and may help you start to build some financial history that could help you going forward.