​Costs and Downfall of Buying a New Business Vehicle vs. Keeping the One you Have

Having a service van, motorcycle for deliveries or any utility vehicle for your business is beneficial. It helps speed up the catering of goods and the relaying of services. However, a vehicle is a type of asset, which comes with a value that degrades due to constant usage over time. Soon, you will need to decide whether you should scrap, trade or buy a new vehicle in lieu of the old one.

The first question to ask is whether it is the proper time to dispose your vehicle. One point to consider is the type of business that you’re running. Having an old and shabby vehicle that is already falling apart can tarnish a good business’ reputation. By failing to meet with the demands of the work, your old vehicle can become an instrument that ruins the customers’ image of your business.

For example, a shop that delivers food to the customers’ homes can be placed into jeopardy because of the time-sensitiveness that it offers. If your old vehicle can no longer keep up with the time, customers’ satisfaction will be affected.

Another thing that you should ask is the amount of work that revolves around riding your business vehicle. If your business trips put you for considerable long miles away from home, it is best to invest in a much stronger car. Having an unreliable vehicle can put you at risk of being stranded on the road, compromising your business as well as your safety.

In the decision making process, it is also wise to consider the opinions of your employees. Sometimes, your old vehicle has a unique feature that you cannot easily replace with a new one. Some old delivery vans or trucks have higher capacities in comparison to the new models. Talking to your drivers can help you learn more about your vehicles to help sway the decision. Best of all, talk to a mechanic that you regularly go to. A mechanic can help predict the lifespan of your vehicle.

He can tell you what exactly needs repair and what you will most likely need to replace in the next couple of months. In this way, you will not be surprised at the amount of money drained away due to repairs. Once you learn about the estimates, you can decide if you are capable of purchasing such repairs or you would rather buy a new one than risk going through a time with your vehicle at the repair shop.

When is the proper time to dispose a business vehicle? Some government agencies determine whether it is time to dispose a vehicle. If it has reached a certain maximum amount of money in terms of repairs, it is immediately sold at an auction and replaced. The problem is, business owners do not have the luxury of replacing every business vehicle when repairs reached that certain amount. If the business vehicle has already reached the hundred thousand mile mark and is still performing well, it may be more worth keeping rather than being sold or scrapped.

One downfall of selling an old vehicle is that its value may rise and fall in just a short period of time. If you owned a business vehicle and failed to check on its current book value, you may be led to believe that it is worth a lot more than it is now, only to be shocked that it isn’t.

If you’re comparing expenses, having a business vehicle will expose you to four basic types of costs: Operations, Maintenance, Insurance and Depreciation.

Operational expenses are the simple ones such as gas, oil, registrations and taxes. For both new and old cars, they are almost practically the same. Depending on the model, some new vehicles eat up more gas than the old ones. Repairs are considered important when purchasing a business car. Since you know your old car very well, you are well aware of its current condition and maintenance expenses.

You can determine a new vehicle’s repair costs if you would divide the estimated repairs on your old car by the years that you own it. Insurance cost is a factor that totally depends on you. Upon knowing how much it usually costs, you can neglect it or supply your desired budget on it.

Finally, depreciation or the loss of a vehicle’s value is the major cost of a new vehicle as well as the important factor in keeping your old one. This is based on the model and condition of a vehicle and more importantly on the number of years that you have owned it.

Aside from the four types of expenses that a vehicle owner faces, you can also look at your costs in two divisions: the Standard and Running expenses. Standard expenses are basic costs that a business owner will pay regardless whether the vehicle is being used or not. These include taxes, insurance, capital, depreciation, etc. Running costs, on the other hand, are payments such as toll fees, gas, tire replacements, parking fees and repairs.

After you have made a comparison of the probable expenses that you will be shouldering once you’ve decided on a new vehicle, it is also important to consider the existing financial payments that you are still doing with your old one. Having a business means that your assets should be declared and taxed. By owning a new valuable business vehicle, it is most likely that you will be facing a higher property tax assessment.

Perhaps the biggest downfall of purchasing a new business vehicle would be if you are still unable to pay off your old business vehicle. After all, budget is one of the greatest things to consider when adding a new asset to your business. How would you be able to pay for a car every month if you’re still paying for your old one?

Sometimes, even new business vehicles can have unexpected repair costs. The best solution is to not have your asset make a decision for your business. Deciding to buy a new vehicle should come before your old one falls apart entirely. By planning for the future, you’ll be able to effectively avoid disasters in your business.