Vehicle costs are one of the largest outgoings for many businesses. So, of course, getting from A to B is also an area that is ripe for making savings. And this is an area where the economic and environmental objectives can coincide. Saving money on that big metal box and its fueling can also contribute to saving the planet and reducing air pollution.
Every so often you should do an audit and review of your costs and look into every cost centre to see how you can drive costs down and make savings. In this article, we look at business vehicle costs. Here are our top tips for finding and making those savings.
1. What type of insurance do you have
Have a good look at your insurance cover. This is an area where you can very often find savings. First look at the level of coverage. Is the insurance fully comprehensive, does it cover unlimited mileage and if so is this necessary if your business is only doing 5000 miles a year? Are you covered for any car accidents or are there limitations?
If you have let your vehicle insurance stay with the same insurer for multiple years, chances are that a quick review of those factors could bring the price down. Sadly loyalty rarely counts for anything these days with large companies, so it is well worth checking the comparison sites each year for lower deals.
If you have more than one business vehicle, do you have one insurance policy for all of your business vehicles or are they on separate policies because they were purchased or leased at different times throughout the year? Whether you have motorcycle insurance, van insurance or car insurance, it can pay to have your vehicles insured under the same umbrella and with one provider.
2. Invest in electric vehicles
It is no secret that governments everywhere are trying to cut down on the amount of gas-guzzling cars and vans on the road. Whether that is through increased insurance premiums or more vehicle tax. Now might just be the perfect time to invest in electric vans for your business. Electric or hybrid vans are more expensive to initially purchase, but they are cheaper to run in the long term. Some local governments are offering loans and grants to purchase electric vehicles as they are keen to encourage businesses to go greener for the environment. So why not try using the quieter more eco-friendly electric vehicles that are currently hitting the market.
Alternativley, think about whether you could reduce the size of your vehicle, or even do without. Smaller vehicles use less fuel and have much lower tax bands. The savings are even greater if you need to drive in congestion charge zones.
One of the few positives to come out of the Covid crisis is a great improvement and increased use of video conferencing and home deliveries. Do you really need to travel as much? Could you have these things delivered instead of making the trip yourself?
If you simply need to transport yourself, could you manage with public transport, a bicycle or motorcycle? Every city these days has a car club, where you can join and pick up a car from a nearby street, by the hour. There are also bicycle and scooter schemes across the land, where you sign up to an app that shows you what is available in your area and then charges you by the minute of part of an hour.
4. Drive efficiently
You can save a surprising amount of fuel by driving more efficiently. That starts with keeping your vehicle in tip-top shape. Make sure that your tires are fully inflated and that you’re not carrying unnecessary loads in the vehicle. Take off any roof racks or roof boxes when you’re not using them as they add up to 39% drag. Air conditioning and heating also take energy away from the engine, so wrap up and try not to use them as much.
When you are driving, select the highest possible gear at any time and try not to brake sharply, steady is always more efficient. From starting try to move up through the gears as quickly as you can. You should obviously keep to speed limits. While you are in higher speed limit areas you’ll need to hit the best balance between the cost of your time and the most fuel efficient speed of between 45 and 50 miles per hour.
5. Buy your business vehicle in the most tax-efficient manner
The best way of purchasing your vehicle in a tax efficient manner can be complicated. It’s a big purchase, so get advice from an accountant. In summary though, if you are a sole trader or the vehicle is mostly for personal use, then you should claim expenses at the HMRC approved rate for any business-related travel. The HMRC rate is 45p a mile for the first 10,000 miles each year, then 25p a mile after that. For motorcycles the rate is 24p a mile.
If you have a Limited Company then you may either purchase the vehicle outright or lease it. If you buy the vehicle it is treated as a capital allowance and written down against taxable profits over several years. If you need to take out a loan, then the interest, not the capital, of the loan is a company expense. Alternatively, many companies find it more efficient to lease vehicles. The lease payments are entirely eligible as a business expense, alongside running costs. If you use the vehicle for personal use then that would be charged as a benefit in kind. Vans and motorcycles can qualify for 100% allowances under the Annual Investment Allowance scheme.
It is important to remember that reducing costs in both the short term and long term is about compromising and constantly evolving to suit the needs of your business. And finally whatever type of vehicle you have, if you urgently need to raise funds for cash flow your vehicle is an asset that you could use as security for a loan, even title loans for motorcycles.
As a business owner, it is important to keep tabs on your business, ensuring you are getting the best value for money at all times, so you can save money in every area of your business. If you can help reduce carbon use and pollution at the same time that has to be a good thing all round.