You don’t have to be a multinational to have company cars. In fact, most small businesses in the U.S. own at least one car. While the reasons for a business owning a vehicle are varied, one issue ties ever business together – what to do when a vehicle nears the end of this useful life. In larger companies, this is the purview of fleet managers. But in a small business is it usually the owner and maybe their accountant who decides what to do with the company’s cars. So, if you are a small business owner then you will want to read this guide on the best way for businesses to sell their cars.
Know Your Options
When it comes to de-fleeting, several options are available to business owners. These include selling online, through an auction, wholesaler, employee sale, donation, or via trade-in. The one thing to know about these options is that some can leave up to half of the car’s market value on the table, which is not nearly as beneficial for you as would be the wholesale formula.
In doing so, the company is not optimizing the liquidation value of the asset. Not only does this impact the value of the company, but it also impacts how much cash is made available to the company through sale.
While selling the car directly, either online or offline, is the best way to maximize the value of a vehicle. Doing so takes time and energy away from the core activities of your business. Fortunately, another option has cropped up in recent years – consignment.
This new option offers the best of both worlds for a business. Selling the car at the highest possible value, while spending as little time as possible to coordinate the sale. While this option is not without costs, these are generally lower than other options available to companies looking to sell their car.
Consider Car Buying Companies
Car buying companies do exist, and they are the perfect solution to easily sell company cars without worrying about figuring out the straight line depreciation formula. These services allow you to sell multiple cars at once, which makes it easy to sell a fleet of business cars if you need. You can also unload your business car right away instead of having to wait for an interested buyer, which is certainly an advantage. With a car buying service, you also earn cash outright. No need to worry about trade-ins or other similar offers. Make sure you consider car buying services when you are trying to sell a business car.
What About A Totaled Vehicle?
Selling a totaled vehicle can be tricky for a business. First, you are waiting for your insurance company to complete any payments. Second, if the driver of the vehicle was deemed to be at fault, then the business might have to pay further liabilities beyond insurance payout and the vehicle itself may be evidence in any civil proceedings.
Finally, the sale of a totaled car requires close coordination with your accountant as the asset value of the vehicle needs to be written off in some way. The definition of a ‘totaled car’ is one for which the cost of repair exceeds the pre-accident value of the car. This can be tricky on a number of levels.
The depreciation of assets is managed by the Internal Revenue Service (IRS) in Publication 946. By outlining the formula for depreciating the value of a vehicle, it opens the possibility that the market value of a vehicle may well be more that its value for tax purposes.
This is way determining the value of a totaled vehicle owned by a business. While the sale price of a total vehicle is usually determined by the actual cash value of a car, there might be times when a business will accept less – especially if there is a tax advantage to doing so.
What Does This Mean?
If your vehicle is not totaled, then consignment may well be the best option for sale, much like flipping houses in real estate. This will allow you to maximize the asset value, which in turn give you more cash to buy, or lease, a replacement vehicle.
Other sale options could include employee sale, but this can get tricky if the vehicle has a history of maintenance issues. Donation should also be considered, doing so will help the community and there are tax advantages.
However, selling a totaled vehicle requires a bit more work. As mentioned you will need to review the value and the sale price of the vehicle, while considering the tax implications of both. That being said, the process needn’t be over-complicated. Just remember to involve your accountant and they will give you actionable advice on what to look out for.
At the end of the day, you shouldn’t spend your days worrying about how to sell your company’s cars. So, the best way to sell your vehicles is the one which helps you maximize its value without taking up too much time.
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