Did you know that 45% of small ecommerce businesses lose sales due to inefficient supply chain management?
Their estimated losses range from $5000 to $25000, which could have been their profit.
Two major supply chain issues these business owners face are inefficient delivery and ridiculously high shipping charges.
So how can you eliminate these dangers from threatening the profitability of your business? Simply by buying a car.
This guide will show you how to do that without breaking the bank.
Let’s get started!
Benefits Of Buying A Car For E-Commerce Businesses
Before we hop onto how you can buy a car for your business, let’s first discuss why you need one.
Here’s how buying a car will positively impact your business activity:
Greater Customer Retention Rates
There are two ways to deliver goods to your customers — in-house or third-party.
Although hiring delivery services can be tempting as it makes things easier, it can also be the reason for your downfall. That’s because external delivery teams would not treat the job as seriously as you would — which could lead to delays, bad customer experiences, damaged goods, higher shipping costs, and whatnot.
So, if you’re aiming for happier customers that return to purchase again, a stable business, and a flawless delivery service, it’s best to do it yourself. And that journey begins with owning a car that’s properly insured.
Convenient Meet-Ups With Suppliers
As an e-commerce business owner, you must often meet your suppliers in person. You might need to do so to discuss products, negotiate contracts, and establish trust. A car can provide flexibility to meet these individuals at your preferred time, location, and convenience.
Easy Access To Growth-Oriented Events
If you want to scale your business from five figures to six and then from six figures to seven, it’s essential to keep yourself well-informed about the latest e-commerce trends and predictions. You can indeed get this information online. But in-person events often come along with additional perks, such as opportunities to:
- Promote your business & initiate collaborations
- Build friendly & progressive relations with competitors
- Gain deeper insights into industry operations
- Experience products and services firsthand
You and your team will need a car to attend these events, mainly if they are located in areas that are not accessible by public transportation.
Tax Deductions
Another benefit of buying a car for your e-commerce business is that you can claim tax deductions for depreciation, maintenance, and other expenses related to the vehicle.
Types Of E-Commerce Car Loans
We mentioned we’d share a few ways to help you buy a car without breaking the bank (i.e., not needing to pay the total amount in one go). And you can use five different types of car loans to do that. These are:
1. Secured & Unsecured Auto Loan
These loans can be acquired from peers or individual lenders. In secured auto loans, the vehicle is the collateral of the loan. If you fail to make payments, the lender will retrieve the car. These loans, also known as chattel mortgages, usually have low-interest rates. For more information, click here.
On the contrary, unsecured auto loans are granted based on your creditworthiness, and the vehicle is not collateral. If you fail to repay the loan, the lender cannot retrieve the car. Instead, they will have to pursue a lawsuit, which is why these loans have higher interest rates.
2. Car Lease
If you lease a car, you agree to pay a certain amount every month. You can keep the vehicle throughout the agreed term of the lease agreement. But you must maintain it well and use it carefully because you must return it at the end of the contract.
The duration of car lease agreements is usually 2-3 years, which allows you to upgrade to better cars every few years. But it also means careful and limited usage. Plus, you don’t own the vehicle.
3. Hire Purchase
A hire purchase agreement is similar to installment plans. The difference is that you don’t own the car until you make the last payment. What’s more, the monthly payments for hire purchase agreements are higher than leasing, and there’s usually a fixed interest rate.
4. Balloon Loan
A balloon loan is a type of loan where the payments are low initially and increase over time. At the end of the loan, there’s a huge balloon payment, which is much larger than previous payments.
This type of loan is suitable for aspiring e-commerce business owners who do not have sufficient funds yet but expect to grow over time.
5. Business Auto Loan
Business auto loans are hard to acquire because strict assessment criteria assess things like creditworthiness and business stability. But these loans often have more favorable terms. They offer longer repayment terms and lower interest rates than personal auto loans.
Factors To Consider When Choosing A Car Loan Type
Now that you know the different options for purchasing a business vehicle, here are a few factors to consider when choosing one.
Interest Rates
Contact multiple lenders, compare the rates offered, and opt for the lowest possible rate provided by a reputable lender. Also, try to get a fixed rate instead of a variable one so your payments remain predictable.
Loan Terms
Longer loan terms mean a longer repayment time but high-interest rates. Shorter loan terms mean a short repayment time (1-1.5 years) but a low-interest rate. Consider your budget and financial goals before choosing a loan term.
Fees & Charges
Some lenders charge for their reputation. So, ensure you’re not paying unreasonable amounts because they’re a big name in the industry. Research and find the standard charges in your local area before settling for a lender.
Credibility Of The Lender
Lastly, check out the lender’s reviews online or contact their previous customers. If they’re mostly positive, go ahead. If not, search for a better option. Never trust a lender with low credibility and a lousy reputation, even offering a meager interest rate. By exploring a range of car finance options and using car finance tax calculators, you’ll have the confidence to choose a lender with a strong reputation and competitive rates. Taking the time to research now can save you from potential pitfalls later.
