Whether it’s from a steady cash flow or an ongoing expansion in your industry, adopting strategies to grow your business can make sure your company stays current and continues to offer customers what they demand. However, many expansion strategies call for additional investment in assets, including financing the cost of a new vehicle.
While it may be your first foray into the delivery market or a part of your plan to rebrand your business, choosing a business vehicle can be incredibly personal and specific to your business and its expansion goals. While there is no shortage of options on the market, there are several considerations that can help when choosing the perfect vehicle to fit into your expansion plans.
Planned Funding/Financing
One of the first factors that come to mind when planning a business expansion is your business’ financial position, and that is no different when it comes to securing a new vehicle. Using your current budget, financing, and retained earnings, you must think about the ownership route you are willing to take and more importantly, can afford to take.
Some businesses opt to purchase a new vehicle, whilst others go to auctions or second-hand sellers for a cheaper price. Leasing or rental can also be an attractive option, since most leases come with smaller deposits and stipulate that the leasing company should pay for repairs. For small businesses or cash strapped companies, this can be an option that lends itself well to struggling cash flow.
As a bonus, companies can claim tax allowances for business vehicles. However, plans to use the vehicle for business expansion plans may not always pan out perfectly. By then, you are locked into a contract with possible early termination penalties and interest rates. In addition, you need to consider the control factor. Depending on the terms of your lease contract, you may have a limited say when it comes to decisions for the vehicle, which can become cumbersome.
Intended Use And Users
Another consideration when deciding on the right vehicle for your business is the intended purpose for the vehicle. One popular expansion plan may be adding home delivery services to your business or the addition of new routes. If this is the case, you must take into account the product, ideal transport conditions and of course, the time for the route. Adding new delivery routes to far-out locations from the business’ warehouse may mean securing specialist vehicles to ensure the product is well stored.
However, you may also be looking to add a vehicle for business trips and employee use. In this case, the suitability criteria may change. In addition, the taxable fuel limits should be kept in mind, since business use and fuel is an allowable tax benefit, which is calculated based on emissions.
Finally, think of whether there will be an element of private use either by yourself or an employee when choosing a vehicle. This will help to guide you on the non-negotiable features in your vehicle choice. Ideally, businesses tend to prefer issuing business-owned vehicles for work tasks, since using a grey fleet can be complicated when it comes to their management and tracking.
Maintenance Costs And Schedule
Regular maintenance of your fleet is needed to ensure it keeps running efficiently and its useful life is maximized. Different vehicles will have varying maintenance costs and timelines, which will come to be regarded as an additional overhead cost. Replacement parts will also have different costs and availability. Neglecting routine maintenance or repairs can extend the vehicle downtime, which in turn negatively impacts on your business operations.
Finally, consider the resale value and plans for the end of its useful life. Leases may allow you to purchase the vehicle for less than the market rate at the end of the lease, or require a return to leasor. In addition, some vehicles can be repurposed elsewhere in the business, such as for shorter trips or supply pickups. There is a lot that goes into choosing a vehicle, personal or in business. However, the general measure is how well it matches up with your business needs.
Image: https://unsplash.com/photos/ovrOPhu8vSw
