How to Justify a Company Car

by Louise Balle; Updated September 26, 2017

Getting a company car is not an inexpensive business decision. It is an expense that you really should justify, meaning that you confirm that it makes good business sense. If you’ve determined that you might need a company car, take the time to identify and list the reasons why you might need one. The bottom line is that a company is justifiable if it will make the company more profitable.

Step 1

Determine the amount of travel required to operate the business. Estimate a percentage during your evaluation. For instance, for a delivery service the travel required to operate is close to 100 percent, while a graphic design business may require workers to travel about 20 percent of the time to pick up printed materials. If you need to use the car for business reasons more than half of the time during operation that is one potential justification for a company car.

Step 2

Determine the needs of your workforce. If the business requires sales executives to "woo" or persuade clients to work with your company through in-person meetings, this is one solid justification for purchasing or leasing a well-appointed company car for picking up clients.

Step 3

Consider the potential tax benefits of getting a company car. In most cases you’re permitted to deduct the cost of using a car exclusively for business. The costs of maintaining and driving the car are included under a standard mileage rate set by the IRS, which varies each year. For example, if the mileage rate is 55 cents, driving the company car 500 miles per month may allow you to deduct up to $275 per month as an additional expense.

Step 4

Determine the cost of your current mode of transportation. For instance, estimate how much do you spend each year on hiring car services, taxis, trains and public transportation to transport yourself or employees for business related needs.

Step 5

Estimate the total monthly cost of a car lease or loan after evaluating these factors. That includes insurance and maintenance costs. Compare it to what you currently pay for other modes of transportation. Add the proposed vehicle cost into your existing business budget as a hypothetical scenario. If projections show that adding the business vehicle for your budget increases your profits over time that is one of the clearest justifications for taking on the added expense.

Tips

  • Some business forecasting programs allow you to create a projection over the course of a year or more that shows the progression of income versus expenses, or profitability, due to acquiring the business car.

About the Author

Louise Balle has been writing Web articles since 2004, covering everything from business promotion to topics on beauty. Her work can be found on various websites. She has a small-business background and experience as a layout and graphics designer for Web and book projects.