A good amount of small businesses need vehicles for transporting equipment, getting to and from jobs and just getting employees from place to place. Maybe you need a fleet of vehicles, maybe you just need a handful of trucks to cart things around. Regardless of how many vehicles you are using, you’ll want to make sure you are accounting for responsibilities such as managing costs, staying compliant with laws, and ensuring safety. Think about the following when it comes to using vehicles for your small business.

Choosing the Right Vehicle for the Job

The first thing you want to think about is choosing the right vehicle that suits your business needs. Consider the following.

What Type of Vehicle Do You Need?

 Delivery vans are ideal for businesses that need to transport products or equipment in bulk, such as retail stores, catering businesses, or cleaning services.

• Pick-up trucks are best for construction, landscaping, or businesses that involve hauling materials.
• Sedans or compact cars are most suitable for service-based businesses or sales teams that require frequent travel, but don’t need much cargo space.
• Specialized vehicles might be needed if your business requires refrigeration or additional security features.

New vs. Used Vehicles

New vehicles may offer the latest technology, better warranties, and be generally more reliable, but they come at a higher cost. Used vehicles can be more affordable for businesses operating on a tight budget, but they may require more maintenance which also involves a cost. If you go this route, ensure that you do a thorough inspection and obtain a vehicle history report.

Lease or Buy Your Business’s Vehicles

Leasing a vehicle can provide flexibility with lower monthly payments and access to newer models, but mileage limits and restrictions apply. If you’re driving lots of miles or plan to service a wide area, you may want to consider buying. Buying provides full ownership with no mileage limits, but higher costs apply and the vehicle will depreciate over time.

Selecting Business Vehicle Insurance

Once you’ve chosen your vehicle, you’ll want to make sure you have the right insurance coverage. Commercial vehicle insurance is different from personal auto insurance, and using a personal policy for business activities could create problems in the event of an accident.

Types of Insurance Coverage for Business Vehicles

Despite common misconceptions, auto insurance is not a one-and-done situation. You may need more than one policy to ensure your vehicles are covered.

• Liability coverage: Covers damage or injury you cause to others while driving the vehicle. This is the minimum required by law.
• Collision coverage: Will cover any damage to your vehicle from accidents, regardless of who is at fault.
• Comprehensive coverage: As the name comprehensive would imply, this insurance covers you for non-collision-related damage such as theft, vandalism, or natural disasters.
• Uninsured/underinsured motorist coverage: Although we always hope this doesn’t turn out to be the case, this coverage protects you if you’re involved in an accident with someone who has insufficient insurance.
• Hired and non-owned vehicle coverage: There may come a time when you or your employees use their own vehicles for work.  This type of insurance is essential if you or your employees use personal vehicles for business purposes because it covers any losses while on the job.

Requirements by Law

Every state has minimum insurance requirements, but that doesn’t mean everyone follows the law. You also want to ensure that your insurance coverage is sufficient to cover potential claims. For example, delivery drivers or companies transporting valuable goods may need higher liability limits to avoid gaps in coverage.

Worker’s Compensation

 If your employees drive company vehicles, you may need workers’ compensation insurance to cover potential injuries while on the job.

Tracking and Managing Costs Related to Vehicles and Travel

Using vehicles for your business involves far more than just physical maintenance. There are other items to track for accounting and tax purposes. Here are a few things you need to think about.

Fuel Costs

Gas prices are up across the country, making fuel one of the largest ongoing expenses for a business vehicle. You can mitigate these costs by choosing fuel-efficient vehicles, using route optimization tools, or reimbursing employees for business mileage using standard IRS mileage rates (as of 2024, it’s 65.5 cents per mile for business miles driven). Fuel is also a deductible you can apply to your taxes.

Licensing and Registration

Ensure that your business vehicles are registered and that drivers have the appropriate licenses. For example, if your business requires driving large or heavy vehicles, your employees may need a commercial driver’s license (CDL), which could involve additional costs and training.

Maintenance and Repairs

Regular maintenance keeps your vehicle in good condition and helps avoid costly repairs and any operational downtime. Make sure you are performing regular oil changes, tire rotations, brake inspections, and fluid refills. Many businesses also choose to set aside a portion of their budget for unexpected repairs.

Depreciation

Unfortunately, vehicles age and depreciate over time, which can affect your financial statements. Depreciation is inevitable, but buying reliable vehicles and maintaining them properly can slow this process.

Employee Use of Vehicles

If your employees will be driving company vehicles, there are additional items you’ll want to think about in order to ensure your business does not become liable for accident of injury.

Policies for Employee Drivers

 Establish clear guidelines for employees who drive company vehicles, including:

• Who is allowed to drive the vehicle
• Allowed uses, such as when those vehicles can and cannot be taken home
• Maintenance responsibilities
• Reporting accidents or violations

Monitoring and Accountability

Using GPS tracking systems or other tools can help monitor vehicle use, track mileage, and ensure employees are following proper driving practices. This can help you keep track of any deductions and maintenance needs without adding to your employees’ jobs.

Using vehicles is mandatory for many small businesses, but it requires some planning and management. Above all, make sure you are compliant with laws and you have the right auto insurance coverage. Accidents happen, make sure you’re covered.