A guide to buying a car for business use

Buying a car, van or truck for business use under a business name may offer plenty of advantages to support your operational needs. Although Chase doesn’t offer financing on cars intended for business purposes, let’s cover what that process might require and several tips to keep in mind before you make your purchase.

Advantages of buying a car for business use

Buying a car for business use can offer a variety of advantages including:

• Potential tax advantages: Buying a car for business use can potentially offer you the ability to deduct depreciation and qualified vehicle expenses (including vehicle maintenance) from your business income.
• Convenience: Buying a car for business use can offer convenience and flexibility for employees who need to travel for work.
• Brand advertising: Buying a car for business can allow you to customize it and market your business. You can add visible information like your brand name, domain name, contact information and graphics to raise awareness of your company.

You may want to be mindful about using a business car for personal use. For tax purposes, it can be useful to keep good records that help prove the vehicle is primarily used for business purposes. Consulting a qualified tax expert may help you get more specifics on what qualifies as business vs. personal use.

How to buy a car through your business

The process of buying a car through your business can look a little different than it might if you were buying a new or used car for yourself. For example, when you’re buying a car for your business, you’ll be registering the car under your business name instead of your own.

Typically, to buy a car under your business name, you’ll follow these steps:

1. Identify your needs: Think about why your business needs a car and what you're purchasing it to solve for. For instance, you may need a van 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 your business car, you’ll need to have a business credit profile and credit score through a credit bureau that generates business credit reports. If you don’t already have that profile, you may need time to build a strong business credit score before lenders are willing to offer you a car loan using business credit.
3. Shop for insurance: You’ll usually need to purchase car insurance before you can register the vehicle. Shopping around with different insurance companies and asking about coverage costs and requirements for your business car may help you find a rate that fits your needs.
4. Search for financing: Typically, you can apply for a business car loan through either a financial institution that serves business clients or the commercial sales department of a car dealership.
5. Purchase the car under your business’ name: Once you've obtained financing, you can purchase the vehicle. In addition, make sure the vehicle title has the legal name of the business.
6. Register the car: Register the vehicle under your business’ legal name with your state's Department of Motor Vehicles (DMV). You'll likely need your proof of insurance and a copy of the car title.

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

Applying for a car loan for your business often requires you to have different documentation than a personal car loan would. To apply for a car loan as a business, lenders will typically require you to show them a combination of the following:

• Your business license: This document proves to lenders that your business is legally recognized and registered in your state.
• An employer identification number (EIN): Your Federal Tax Identification Number (EIN) will be required to prove your business entity.
• Your business credit report: Lenders will look at your business’ credit history to assess 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 business’ financial health.
• Your business plan: Though not always required, presenting a thoughtful business plan may help lenders understand your potential (or current) success. This may help them feel more confident about your ability to repay the loan.

What documents do you need to keep for your business vehicle?

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

If the car is also used for personal use, you may want to document these instances carefully and only deduct business-related car expenses. Speaking with a professional tax consultant can help you separate these expenses.

In summary

Buying a car for business use under a business name can offer plenty of advantages to assist your operation. Unlike buying a car for personal use, you’ll likely need to establish and prove your business credit before lenders consider offering you a loan for your company car. Lastly, consider maintaining a detailed record of your business car expenses, as this may help come tax season.