How to Buy a Car Under a Business Name
Obtain a tax ID number., Create a credit profile., Build your business credit., Check your business credit score., Find dealerships with commercial sale departments., Choose an appropriate vehicle., Provide financial information., Finance in your...
Step-by-Step Guide
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Step 1: Obtain a tax ID number.
You’ll need an (EIN) from the IRS to establish your business credit.You can get it at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
Alternately, you can fill out IRS form SS-4, which is available at the IRS website. -
Step 2: Create a credit profile.
Contact Dun & Bradstreet, which is the major credit bureau for businesses.
You can create a profile and upload company information, such as financial statements.Set up your Dun & Bradstreet profile at their website.
You’ll need at least three trade lines to get a Dun & Bradstreet credit score (called a Paydex score).
You can get trade lines with large retailers, such as FedEx, Home Depot, or Staples.
Ask the vendor to report your payment information to Dun & Bradstreet if they aren’t doing it already. , It can take up to two years to build up enough credit for your business to qualify for a car loan.To get the highest score, you should do the following:
Pay your bills early.
A history of timely payments will improve your business credit score.
It’s also important to pay early, since that’s the only way you can qualify for the highest Paydex score.
Avoid using too much credit.
Limit your use to 20-30% of available credit.Clean up your public records.
Bankruptcies, liens, and court judgments against your business will all lower your credit score.
If a client has a lien, try to pay the debt and get the lien released. , Before heading out to a dealership, you should pull your business credit score from each of the three main credit bureaus:
Dun & Bradstreet, Equifax, and Experian.
Business credit scores range from 0-100.You’ll need to pay to see your business credit score.
Contact each bureau individually.
You can get your Experian credit history for around $36.95, your Equifax score for $99.99, and your Dun & Bradstreet for $61.99.
A credit score over 80 is generally good and should qualify you for loans.
If your business credit is weak, consider leasing a car in your company name instead of buying one., These departments specially assist businesses buy and register their vehicles.Stop into a dealership and ask if they have a commercial sales department, which can make buying the car easier., For example, if you have a catering business, then buying a minivan might be appropriate.
However, buying a sports car could raise red flags with the IRS.You should never buy a car for personal use through your business. , Lenders will want to see a variety of financial information before extending a loan.
For example, they might want to see financial records such as your business balance sheet.
You can also expect the lender to pull your personal credit history as well.
For this reason, you should get a free copy of your personal credit report and check it for errors.
Dispute errors with the credit reporting agency that has the wrong information., You can get a loan from the dealership, or you can shop around for a car loan from local banks and credit unions.
Always remember to state that you are seeking a loan in your business name.
Compare interest rates and other terms so that you find the most competitive loan.
You shouldn’t assume that the dealership is giving you the best deal, though obtaining financing from them might be the most convenient. , Your business credit might not be strong enough to get a loan only in your business name.
Some lenders will ask you to sign a guaranty.
This means you are personally responsible for the loan if your business stops making payments.
Think carefully before doing this.
The lender can sue you and come after other personal assets to satisfy the loan. , Always remember to use your business bank accounts to make payments on the car.
If you make payments using personal accounts, then it looks like your business is a sham., If you use the car primarily for business, then you should look into commercial auto insurance.
However, if you only use the car part-time for business, then personal auto insurance might be better.Consider how many employees will be driving the car as well.
You can obtain insurance from large insurers such as Geico, Allstate, and Progressive.
Also check for local insurers in your phone book, who might offer better deals.
If you don’t know where to look, reach out to the insurance agent who sold you business liability insurance. , Car registration differs depending on the state.
You’ll probably need to show that your business has been properly organized by providing copies of your Articles of Organization or Articles of Incorporation.Contact the DMV for information about registration in your state.
Send a member/manager of the business to register the car and not an employee.
The member will need to show their driver’s license.
Remember to pay all registration fees using your business bank account.
Don’t cut a personal check. , You might be using the car for both business and personal use.
However, you can only get a tax deduction for the business portion.
If necessary, keep a mileage journal in which you note how much you drove for business purposes., The tax deduction rules are complicated and depend on whether you own the vehicle as an LLC, one-member LLC, corporation, or partnership.Consult with a tax professional for more information. -
Step 3: Build your business credit.
-
Step 4: Check your business credit score.
-
Step 5: Find dealerships with commercial sale departments.
-
Step 6: Choose an appropriate vehicle.
-
Step 7: Provide financial information.
-
Step 8: Finance in your company name.
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Step 9: Provide a guaranty for the loan.
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Step 10: Make regular payments on the loan.
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Step 11: Obtain insurance.
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Step 12: Register the car in your business name.
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Step 13: Keep a mileage journal
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Step 14: if necessary.
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Step 15: Claim a tax deduction.
Detailed Guide
You’ll need an (EIN) from the IRS to establish your business credit.You can get it at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
Alternately, you can fill out IRS form SS-4, which is available at the IRS website.
Contact Dun & Bradstreet, which is the major credit bureau for businesses.
You can create a profile and upload company information, such as financial statements.Set up your Dun & Bradstreet profile at their website.
You’ll need at least three trade lines to get a Dun & Bradstreet credit score (called a Paydex score).
You can get trade lines with large retailers, such as FedEx, Home Depot, or Staples.
Ask the vendor to report your payment information to Dun & Bradstreet if they aren’t doing it already. , It can take up to two years to build up enough credit for your business to qualify for a car loan.To get the highest score, you should do the following:
Pay your bills early.
A history of timely payments will improve your business credit score.
It’s also important to pay early, since that’s the only way you can qualify for the highest Paydex score.
Avoid using too much credit.
Limit your use to 20-30% of available credit.Clean up your public records.
Bankruptcies, liens, and court judgments against your business will all lower your credit score.
If a client has a lien, try to pay the debt and get the lien released. , Before heading out to a dealership, you should pull your business credit score from each of the three main credit bureaus:
Dun & Bradstreet, Equifax, and Experian.
Business credit scores range from 0-100.You’ll need to pay to see your business credit score.
Contact each bureau individually.
You can get your Experian credit history for around $36.95, your Equifax score for $99.99, and your Dun & Bradstreet for $61.99.
A credit score over 80 is generally good and should qualify you for loans.
If your business credit is weak, consider leasing a car in your company name instead of buying one., These departments specially assist businesses buy and register their vehicles.Stop into a dealership and ask if they have a commercial sales department, which can make buying the car easier., For example, if you have a catering business, then buying a minivan might be appropriate.
However, buying a sports car could raise red flags with the IRS.You should never buy a car for personal use through your business. , Lenders will want to see a variety of financial information before extending a loan.
For example, they might want to see financial records such as your business balance sheet.
You can also expect the lender to pull your personal credit history as well.
For this reason, you should get a free copy of your personal credit report and check it for errors.
Dispute errors with the credit reporting agency that has the wrong information., You can get a loan from the dealership, or you can shop around for a car loan from local banks and credit unions.
Always remember to state that you are seeking a loan in your business name.
Compare interest rates and other terms so that you find the most competitive loan.
You shouldn’t assume that the dealership is giving you the best deal, though obtaining financing from them might be the most convenient. , Your business credit might not be strong enough to get a loan only in your business name.
Some lenders will ask you to sign a guaranty.
This means you are personally responsible for the loan if your business stops making payments.
Think carefully before doing this.
The lender can sue you and come after other personal assets to satisfy the loan. , Always remember to use your business bank accounts to make payments on the car.
If you make payments using personal accounts, then it looks like your business is a sham., If you use the car primarily for business, then you should look into commercial auto insurance.
However, if you only use the car part-time for business, then personal auto insurance might be better.Consider how many employees will be driving the car as well.
You can obtain insurance from large insurers such as Geico, Allstate, and Progressive.
Also check for local insurers in your phone book, who might offer better deals.
If you don’t know where to look, reach out to the insurance agent who sold you business liability insurance. , Car registration differs depending on the state.
You’ll probably need to show that your business has been properly organized by providing copies of your Articles of Organization or Articles of Incorporation.Contact the DMV for information about registration in your state.
Send a member/manager of the business to register the car and not an employee.
The member will need to show their driver’s license.
Remember to pay all registration fees using your business bank account.
Don’t cut a personal check. , You might be using the car for both business and personal use.
However, you can only get a tax deduction for the business portion.
If necessary, keep a mileage journal in which you note how much you drove for business purposes., The tax deduction rules are complicated and depend on whether you own the vehicle as an LLC, one-member LLC, corporation, or partnership.Consult with a tax professional for more information.
About the Author
Marie Lewis
Experienced content creator specializing in crafts guides and tutorials.
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