I have recently decided to be my own boss and now that I am self-employed, can I buy a vehicle for my business or personal use?
The decision to become independent and self-employed is a massive one and is not for the faint-hearted. There are many consequences to being self-employed; some are good while others are not. The problem is that when you are making the decision to go out by yourself, many of the consequences are overlooked.
Banks are not fans of the newly self-employed
When it comes to any financing that is required, traditional banks and lending facilities are not fans of newly self-employed people or companies that have just opened. The reason for this is that they have no proven track record. Lending facilities do not like to take risks, they want reasonably risk-free clients that they are confident will be able to repay them the money that has been loaned to them.
As a result, when requiring a loan for vehicle financing, newly self-employed customers are likely to have their request rejected by the financing institution.
How To overcome this challenge
Overcoming the challenge of owning a vehicle when newly self-employed is fairly easy thanks to the innovative Rent-to-own car deals that are now offered by some car dealers. These deals are not limited purely to cars but often bakkies are on offer as well.
How a rent-to-own deal works
Rent-to-own deals do not require credit checks and so your credit history is not important.
With a rent-to-own deal, the vehicle will remain registered to the car dealer until such time as your last payment is made to the dealer as per the contract that you entered into with them. Contract terms vary from 48 months to 72 months depending on the dealer.
Once the term period is completed the vehicle is registered in your name and is now 100% legally yours. In reality, this is not that much different from a deal through the banks where the vehicle is in your name from day 1 but the title to the vehicle is held by the bank. Effectively the vehicle is to yours until the day you have finished paying and the bank hands the registration papers back to you.
Tax Advantages of Rent-to-Own vehicles
A business and its owner have to always ensure that they pay as little tax as possible while still being totally tax compliant – never cheat that tax man but take full advantage of all legal means to save on your tax bill.
A vehicle that is purchased outright or through a bank is considered an asset and therefore when you do your tax returns only the running cost of the vehicle and depreciation of the vehicle is taken into account as a claimable expense.
With a rent-to-own vehicle, the entire vehicle is considered to be an expense and therefore a reduction in your tax bill. The vehicle will only become an asset after the full rental term has been completed.
The added advantage for a new company or self-employed individual is that a rent-to-own vehicle may be returned to the dealer at any stage in the term period with little consequence thereby allowing the business owner a larger degree of adaptability to the current market. Things going bad then hand the vehicle back and walk away. Things going great – upgrade to a better vehicle without a worry.
Conclusion
Rent-to-own car deals have become a lifesaver for the new entrepreneur. The newly self-employed are able to purchase the necessary vehicles without worry and also enjoy the tax savings and flexibility that they offer.
Grab your Rent to own deal now