How Small Businesses Drive For Less

How Small Businesses Drive For Less

Small-business owners who make their living behind the wheel face the constant frustration of on-the-road expenses eating away at their earnings. Even though prices at the pump have dipped slightly in recent weeks, dropping below their $4 high in July, fuel costs still can take a big bite out of profits. Fortunately, there are many ways for businesses to save on vehicle expenses.

Costs for maintenance, full-coverage insurance and depreciation are all slightly lower this year, according to AAA, but overall costs of driving are going up–something that should be of concern to most of America’s 27 million small-business owners. With the costs for fuel, tires, financing, license, registration and taxes all showing recent increases, in 2008 AAA estimates it will cost $8,121 to own and operate a new passenger car driven 15,000 miles per year. This compares with $7,823 per year in 2007.

In Depth: How Small Businesses Drive For Less

“While the cost of some driving expenses declined since the start of 2007, higher gasoline prices have more than offset these savings and pushed the overall cost of vehicle ownership and operation higher this year,” says John Nielsen, director of AAA’s Approved Auto Repair network.

Government Assistance
The silver lining to the dark cloud that is high gas prices is that the summer price spike was enough for the Internal Revenue Service to raise the standard mileage rates a second time this year. For each mile driven between July 1 and Dec. 31, 2008, self-employed workers may deduct 58.5 cents. In January, the IRS raised the rate to 50.5 from 48.5 cents.

While raising the mileage rates might have been a small step, the federal government still wants to encourage businesses to take the much bigger step of buying new cars. As part of the Economic Stimulus Act of 2008, passed Jan. 29, business owners can get a special 50% depreciation allowance, or up to $8,000. This is on top of the existing tax credit that allows a maximum $2,960 deduction for passenger cars and $3,160 for light trucks purchased and used in 2008. The combined write-off can total as much as $11,160 on a 2008 vehicle purchase.

And small-business owners who bought an environmentally friendly hybrid or clean diesel-powered car can take an additional tax credit of up to $3,400 (on eligible vehicles). The IRS allows tax credits for certain hybrid cars that have not exceeded the maximum production level (60,000 annually), like the Nissan Altima hybrid and Chevrolet Malibu hybrid, or diesel-powered vehicles like the Volkswagen Jetta and Mercedes-Benz R320 Bluetec.

Look At The Little Things
Along with government incentives, auto experts say small-business owners would be wise to examine and cut expenses in all areas of vehicle ownership. Reviewing auto-insurance premiums to locate unnecessary coverage, for example, can reduce premium costs by up to 40% just by raising the deductible to $1,000 from $200. Even taking time to check the insurance cost of a new vehicle before purchasing it can save $200 annually, says James Bell, editor and publisher of IntelliChoice.com, a consumer automotive information Web site.

“Nothing replaces the emotion and excitement of a new car, but you have to pause and consider the cost of ownership during the time you operate the vehicle,” says Bell.

Moreover, it’s important for small-business owners to stick with features and functions they need to do their job and nothing more, says Bell. Much of the popularity of pickups and big SUVs in the 1990s was the cool factor–big cars were trendy. The subsequent demand for luxury amenities like leather seats and high-end technology prompted automakers to load the vehicles with equipment that dramatically raised their prices. Small-business owners, however, can forego many of these features and look at the cheaper base models first, says Bell.

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A way to save even more is to consider buying a used car–something one to four years old. You can save anywhere from $1,000 to $6,000 from the new-car price. Add in cash incentives of $500 to $4,000 and the savings quickly add up.

And if no car–used or new–is in the budget, auto experts say you can maximize fuel efficiency by staying current with routine maintenance, observing posted speed limits and keeping tires properly inflated. Combined, all of these things can amount to annual savings of about $1,200 on fuel.

Source: cheapcarleasing.wordpress.com