If you are considering buying company cars or expanding your current fleet, here's a look at three cars worth the investment.
A small business will go to great lengths to save money. Some ambitious entrepreneurs will sell their car and ride a bike to work. In sunny locales, a few have gone the Vespa route and visit the gas station once every few weeks.
For a company that relies on cars for delivery or sales routes, thinking carefully about which vehicle they purchase is critical. In a few cases, a start-up can create name recognition by driving branded cars that stand out in a crowd, even if the vehicle is mostly for commuting to work and back.
When choosing a car for business, there are a few options available. Check that—there are hundreds of options! Cars come in all shapes and sizes—and at many price points. You can go with a large delivery van like the Ford Transit, attract attention with something like the new Kia Soul, or go the more economical route with a staid (but wholly reliable) compact car.
Thilo Koslowski, an auto analyst with Gartner, argues that any vehicle for business should be treated as an asset that’s no different from the water cooler in your break room. It’s important to add up the cost of fuel, insurance, and even consider intangibles like resale value.
“It is not the most stylish or practical car that wins, but the one that puts the least financial stress on a business,” says Koslowski. “When determining the financial implications of a fleet, companies or business owner must look beyond the purchase price and define total cost of ownership.”
That said there are several strategies for choosing a delivery or commuter car used for business. Here are three wildly different approaches small business owners used to select the perfect car.
1. Focus on Resale Value: Ford Focus
For Molly Maid, a franchise of Service Brands International, a delivery car is not just a functional asset—it’s a testament to the professionalism of the in-home maid service. The company recommends specific vehicles to franchise owners, who usually lease the cars for the maid service initially and then have an option to buy the car when the lease expires.
Meg Roberts, a vice president at Service Brands, says business owners should go with a practical approach: does the car have enough storage capacity? What will be the cost of operating the vehicle? She says it is important to match your actual business needs with the car features.
Next, she says to think about branding. Molly Maid cars use pink detailing to make them stand out, and she says they typically recommend a car that comes in navy blue. The decals need an open space on the side of the car, but some models have too many angles and are too small for that.
“Even when the car is in a parking lot, it is still representing the brand,” says Roberts, who argues that the vehicle used for franchises can be a major differentiator compared to independent maid service companies. There is a level of professionalism and consistency to using the same vehicle.
Roberts says Molly Maid did extensive research on which cars to recommend and centered on just four specific models. One vehicle they recently started recommending to franchisees is the 2012 Ford Focus. There’s a hatchback version with about 24-feet of cubic space in the back with the seats folded up. Base price is around $18,000. The vehicle has a few tech advantages, including a key system where you can program the vehicle to warn the driver at specific speed limits and even to disable high-speed driving.
The Focus is also a mileage leader—the base version gets about 38MPG on the highway. The company also recommends the Chevy Cruze, Toyota Corolla, and the new Nissan Versa.
However, Roberts says one primary criterion they use has to do with resale value. The company is not interested in eye-catching models like the Mini Cooper, which would not have enough cargo space anyway, because she says those vehicles are harder to sell. The idea is that, once the lease expires, the franchise owner has an option to sell the vehicle and start a new lease. She also advises SMBs to look at the base model, but not the manual transmission, which also leads to poor resell value.
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2. Save the Planet: Toyota Prius Hybrid
A driving force for many business owners is saving on fuel costs—especially when the cars are on the road 24x7. Yet, for Michigan Green Cabs, based in Detroit with a second operations center in Ann Arbor, it was also important to reduce carbon emissions.
Jonathan Tobias, the president of Green Cabs, says he researched which car to use for his taxi company extensively, first checking to make sure the vehicle had enough legroom and head room. He looked at the Toyota Camry initially but realized the rear headroom was not that great.
He eventually picked the Toyota Prius Hybrid and now owns 14 of them. Interestingly, the “green” nature of the car—the Prius gets about 51 miles to the gallon and runs on both an electric and gas motor—was not as critical as the interior space. He says the company regularly provides taxi services to major sports dignitaries like the Harlem Globetrotters and no one has complained about space.
Of course, the base price of about $23,000 was also attractive.
“We’re adding these cars as fast as we can,” says Tobias, who originally started the company after a long corporate career and found himself unemployed and semi-retired. Along with his brother, he decided to offer something new that was a major departure from the gas-guzzling Ford Crown Victoria used so often in the taxi business. “Our drivers get an extra $50 or $60 dollars in their pocket each day” he says compared to the Crown Victoria, which will end production next month.
Tobias says the drivers still make money driving the Prius Hybrid even when gas prices fluctuate. He says the vehicle also helps with employee retention—some drivers leave to drive for a competing taxi company and then come back when they realize the Prius is more economical.
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3. Meet Long-Term Needs: Honda Fit
With some business owners, the process of choosing a vehicle is partly an exercise in being practical and making sure the vehicle meets the business needs, and is partly an environmental decision. NutriFit, a healthy meal delivery service based in Los Angeles, chose the Honda Fit because it has good cargo capacity in the hatchback version with fold-down rear seats.
Jackie Keller, the founding director, says she also picked the Fit – which just happens to match the name of her company—because she was conscious about how the vehicle matched up well with the company mission. NutriFit encourages a healthy diet, and she feels the Honda Fit is a fun, sporty car with a green reputation. The car gets about 33 miles to the gallon and has a base price of around $15,000.
“We considered a Chevy van for about 30 seconds,” she says, but quickly started looking into cars with better gas mileage that have enough cargo capacity. To test the Honda Fit, she met with salespeople and brought along 30 delivery bags to see if they would fit in the Fit. They did. Now, after that initial test, she was sold on the car because it has a distinctive look and good gas mileage.
Yet, even though she owns two Honda Fits today (the cars are shared by ten drivers who also use their own vehicles), she is keeping an eye on any product changes to make sure the cargo area is still roomy enough for the delivery bags. Honda will also introduce an electric version of the Fit next year, and she’s curious about that model to see if charging stations will be plentiful along delivery routes.
Interestingly, Keller says she is not convinced that a unique car design helps a small business stand out on the road. For starters, she says there are already too many unique cars on the road, especially in the LA area. At one time, she thought about using a Toyota Scion model with a low profile and unique colors. She ultimately decided to choose the Honda Fit for more practical reasons.
“Most small business owners are just like me—they evaluate this $20,000 purchase and decide if it will bring value to the business. We want to make sure the car will serve our purpose long-term,” she says.
So far, the two models she owns are working out well. One has 156,000 miles on it (which they bought in 2006) and one has just over 35,000 miles (which they bought last year). In the end, she will continue to evaluate the field—the car has to be good for the environment, have some assurance about reliability, and must have enough space for those 30 delivery bags the drivers haul around.
Ultimately, every business owner has different needs—some choose a vehicle that matches the branding requirements and have a high potential resale value. Others care mostly about fuel economy and low emissions. In some cases, all the company needs is reliability and cargo space.
The most important factor in choosing a company car is how the vehicle matches your own business needs. As Gartner’s Koslowski says, it’s mostly a practical business asset.
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