Given the way cars are bought and sold, anxiety when purchasing or leasing your company vehicles is natural. And, the anxiety can significantly diminish the joy of team tooling around in your new vehicle. Here are some mistakes to avoid when acquiring your next company vehicles.
Ignoring Your Budget
Before you go shopping you should take some time to figure out how much you can afford to spend on a vehicle each month. Add up all of your expenses and compare the result to your income. In addition to the monthly car financing expense, remember to consider the cost of fuel, insurance, maintenance and annual registration. Startup companies particularly need to preserve cash.
If the numbers pencil out in your favor, you’ll also know what price range within which you should shop. This is even more of an issue if your business credit score is low. Poor credit car loans carry higher interest rates, so you’ll need to be more realistic about what you can comfortably afford.
Overlooking Loan Pre-Qualification
Once you’ve figured out what you can spend, you’ll know how much you can borrow and repay comfortably.
Having approved financing in hand before you go to a dealership puts you in a position to negotiate even better terms by putting them in competition with your pre-approved loan.
Plus, it helps you stay within your budget.
Getting a Car You Don’t Need
Take some time to figure out exactly what you need your company vehicles to do. Do you have employees for which this will be the primary mode of transportation? Will they be commuting or making deliveries over long distances? Do you have customers who will ride with you on a regular basis?
If you answered yes to any of those questions and you just bought a Miata, you’ve made a mistake.
Spend some time looking at all of the possibilities and narrow the list down to three or four you like best. Learn all you can about them, including the prices for which they typically sell. This way, you’ll know a good deal when you see one.
Glossing Over The Test Drive
A petite woman once visited a VW dealership to buy a Golf Cabriolet. She’d already decided upon the color and the features she wanted. Finding her dream car on the lot, she insisted she didn’t need a test drive; she was ready to make the purchase and go.
When the salesperson insisted she drive the car before buying it, they discovered she was too short to see out of it adequately. The last thing you want is to discover something you can’t live with on your way back to the office in your new vehicle—after signing a 60-month loan agreement.
Negotiating Payments Rather Than Price
One of the first questions a vehicle salesperson asks is the amount of the monthly payment you have in mind. If you answer, they ‘ll respond, “Up to…?” If you say another number you’ll pay more than you intended.
As bad as that is, focusing on the monthly payment over the total price is an even mistake. You can have a low monthly payment and still pay more for the vehicle in total.
All the dealer has to do is stretch your loan term as far they need to go to get to the payment you say you want. If you make 84 payments of $400 each, you’ll pay $33,600 for the car. This isn’t so bad—unless the sticker price is $25,000.
Always negotiate the total price—not the payments.
Agreeing to a Lengthy Loan Term
The basic rule of thumb is if you need to finance a vehicle more than 60 months to manage the monthly payment, you can’t afford that car. In addition to the added cash you’ll fork over in interest payments, you’ll also be making payments on a five year-old car with no warranty on which you owe more than its market value.
What’s more, you’ll stretch your expense budget even thinner trying to keep up with the payments and keep the vehicle running when repairs become necessary. Always avoid financing a car for a longer period of time than its warranty runs.
Paying attention to these mistakes to avoid when buying your next company vehicles will find you driving home knowing you got the best possible deal.