Guide to Buying a Car for Commercial Use

 

Purchasing a car, van, or truck for commercial use under a trade name can provide many benefits to support your operational needs. While Chase does not offer commercial vehicle financing, let’s cover what this process might entail and some tips to consider before making your purchase.

Advantages of buying a car for commercial use

Purchasing a vehicle for business use can provide a variety of benefits including:

• Potential Tax Benefits: Purchasing a vehicle for business use can give you the ability to deduct depreciation and qualified vehicle expenses (including vehicle maintenance ) from your business income.
• Convenience: Purchasing a vehicle for business use can provide convenience and flexibility for employees who need to travel for work.
• Branding: Purchasing a business vehicle may allow you to customize it and market your business. You can add visual information such as your brand name, domain name, contact information, and graphics to increase awareness of your company .

You may want to be careful when using a business vehicle for personal use. For tax purposes, it may be helpful to keep good records that help prove the vehicle was used primarily for business purposes. Consulting a qualified tax professional may help you get more details about what is considered business versus personal use.

How to buy a car through your business

The process of purchasing a car through your business may look a little different than it would if you were purchasing a new or used car for yourself. For example, when you purchase a car for your business, you will register the car in your business name instead of your own.

Typically, to purchase a car in your business name, you need to follow these steps:

1. Determine your needs: Think about why your business needs a vehicle and what you are purchasing to solve that problem. For example, you may need a pickup truck with extra seating or a larger truck with towing capacity to haul products and materials.
2. Understand your business credit history: To secure financing for a business vehicle, you’ll need to have a business credit file and credit score through a credit bureau that reports business credit. If you don’t already have this file, it may take some time to build a strong business credit score before lenders are willing to extend you a business credit auto loan.
3. Shopping for Insurance: You will usually need to purchase auto insurance before you can register your vehicle. Shopping around with different insurance companies and asking about coverage costs and requirements for your commercial vehicle can help you find a rate that suits your needs.
4. Find Financing: Typically, you can apply for a commercial auto loan through a financial institution that serves business customers or the commercial sales department of an auto dealership.
5. Buying the car in your company name: Once you have the financing, you can buy the car. Additionally, make sure the car title is in the legal name of the company.
6. Vehicle Registration: Register the vehicle in your legal business name with your state's Department of Motor Vehicles (DMV). You will likely need proof of insurance and a copy of the vehicle's title .

What documents do you need to apply for a car loan as a businessman?

Applying for a business auto loan often requires different documents than a personal auto loan. To apply for a business auto loan, lenders will typically ask you to provide a combination of the following documents:

• Your Business License: This document proves to lenders that your business is legally recognized and registered in your state.
• Employer Identification Number (EIN): A federal tax identification number (EIN) will be required to verify your business entity.
• Your Business Credit Report: Lenders will look at your business credit history to evaluate and decide on your creditworthiness.
• Financial Statements: Lenders may want to look at any balance sheets, income statements, bank statements , and cash flow statements to get a broad view of your company's financial health.
• Your Business Plan: Although not always required, providing a thoughtful business plan can help lenders understand your potential (or current) success. This can help them feel more confident in your ability to repay the loan.

What documents should you keep for your commercial vehicle?

While you use your business vehicle, you may want to keep detailed records of all vehicle-related uses and expenses. This information can be critical for tax purposes. Specifically, you may want to include costs such as fuel, maintenance, insurance, and depreciation in your records.

If the vehicle is also used for personal use, you may want to carefully document these circumstances and deduct only business-related vehicle expenses. Talking to a professional tax advisor can help you separate these expenses.

In summary

Purchasing a business vehicle under a business name can provide you with several benefits to help you run your business. Unlike purchasing a vehicle for personal use, you will likely need to establish and prove your business credit before lenders will consider extending you a loan to purchase your company vehicle. Finally, consider keeping a detailed record of your business vehicle expenses, as this can help you come tax season.

 

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