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Published June 12th, 2017 by

Running a Business From Your Car: The Financial Details

With your car as your office, you can work anywhere you want, from the park down the road to another state. While working from your car saves you the costs of paying for co-working or office space, there is still a unique set of financial details to consider before making your mobile office a full-time set up.

Keep reading to learn more about taxes, depreciation, and a variety of other costs that come with running your business from your car.

Understand Car Depreciation

Cars depreciate the moment you drive them off the lot—and this Infographic from Edmunds shows exactly how quickly and drastically that happens.

So how does driving your car for eight hours a day, every day, affect the overall depreciation and value of your car? In general, depreciation is affected by whether or not you buy a new car (which depreciate faster), gas prices and the fact that it’s an asset that wears out over time:

“As you use the vehicle, the probability of incurring costs in the future to maintain it increases and thus the value drops. Would you buy a car that needs a new engine for the same price as the same car brand new? Of course not, value has diminished. Depreciation helps account for that diminished value,” explain experts at Wealth Artisan.

Some cars also depreciate faster than others, and Bankrate listed the following as the top five cars with fastest depreciation:

  • 2012 Kia Sedona LX
  • 2013 Chevrolet Impala LT
  • 2012 Jeep Liberty Limited Sport 2WD
  • 2012 Suzuki Grand Vitara Premium RWD
  • 2013 Jaguar XJ AWD

Each of these depreciates from $17K to 50K in the first five years. If your mobile office is tucked into one of these, expect depreciation to be much higher and faster.

Your car will depreciate whether you’re driving it eight hours a day or not, so how do you reduce the affect of what you can control, like wear and tear? The best way is to take good care of your car:

“The motor may purr, the tires may be in mint condition and the transmission could be in perfect working order, but buyers want to feel good about the car they drive,” according to CarFax. They continue, “They’ll also pay more for a car with a properly maintained interior. Using a little elbow grease, Armor All and Windex to keep your car clean can have a big impact on its value when it’s time to sell.”

If you want to get actual numbers for your vehicle, use this Car Depreciation Calculator.

Know Your New Insurance Costs 

With a car office, you’re likely driving significantly more miles than you normally would. The cost of insurance is partly based on how many miles you drive annually, and the more you drive, the higher your insurance. Nerdwallet compared costs when mileage was reduced, and this is what they found:

  • State Farmshowed a 14.3% rate cut in Florida by going from 10,000 miles a year to 5,000 miles.
  • Liberty Mutualrates fell 6.4% in Florida when mileage dropped from 10,000 miles a year to 5,000.
  • Geicooffered 6.2% savings in New York for drivers who went from 10,000 miles a year to 5,000 miles
  • Geicorates fell another 6.8% when mileage dropped from cut from 5,000 miles to 2,500.

When comparing, Nerdwallet found that this wasn’t the case in every state and for insurance agency. Ultimately, to save money, it’s wise to shop around.

Save on Costs by Refinancing Your Auto Loan

If you’re driving an older car, your insurance expenses are already likely higher than with a newer car because older cars have a higher theft rate, according to DMV.org. Add in the costs of more mileage, insurance, gas and maintenance, and all of a sudden your expensive car loan, that used to be manageable, is nearly impossible to pay.

In this case, it may be wise to refinance for a lower rate: “When you refinance, you may be able to extend the length of the loan or lower the amount you pay in interest. Either of these options is far better than the damage caused by missing monthly payments,” according to How Refinancing Your Loan Can Save You Money. You can refinance online, with another lender or with your current lender—they may be willing to adjust and reassess since you already have a relationship. 

Understand Tax Deductions—And Which Option Is Right For You

When using your car for business, you can deduct costs incurred throughout the year, just like you would with a home office. There are two ways you can track these expenses, as outlined below.

Actual Cost Method

Using this method you can deduct lease and insurance payments, gas, maintenance (oil changes, replacements, etc.), new tires, anything with registration or title and vehicle depreciation, which is based on deprecation data from the IRS.

When using this method, create a spreadsheet to track every expense so you don’t miss anything at the end of the year.

Mileage Rate Method

To avoid the record keeping of this method, you can also deduct using the mileage rate method, in which you deduct a certain financial amount per mile driven—which is easier to calculate and track.

The current mile deduction rate (2017) is 53.5 cents per mile driven for business, according to IRS.gov. According to the IRS, “The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

When using this method, track expenses and mileage with something like this Mileage Log to stay organized.

Of these two options, which one should you choose? “If you are driving an older vehicle or lease your vehicle (see example below), the standard mileage rate deduction may give you a higher deduction, since there are the depreciation deductions of new car ownership aren’t available to you,” suggests Derek Davis in The Standard Mileage Versus Actual Expenses Method.

Davis suggests that drivers with cars that get good gas mileage (economical cars) should use this method as well, “the standard mileage rate will likely offer a higher deduction amount—you’ll be spending less on gas and maintenance than the ‘average vehicle,’ yet taking advantage of an IRS deduction designed for the average vehicle.”

Choose the Actual Expenses Method if you’ve just purchased a new car. You’ll be able to write off the depreciation, in addition to all other expenses, giving you a higher total deduction. 

Save for Functional Costs 

Despite being in a car, you still need to invest in similar office “supplies” to be able to work effectively. You don’t want to spend money every week printing contracts and then running late because there was a line when you got there.

Avoid the expense and headache by purchasing the functional accessories that will allow you stay mobile and effective. While you can pick and choose what you want to purchase, some smart accessories to buy include:

Make your space even more “office-like” by using your laptop as a second monitor and installing an organizer in your glove compartment or center console. You can store cables, pens, highlighters and other small items here, reducing clutter in your car.

Plan for Mobile Internet Service

You can’t always be at your favorite coffee shop or siting outside of a free Wi-Fi area. Purchasing mobile Wi-Fi makes it easier for you to be as mobile as you’d like, able to work while riding in the passenger seat, at a local park or in a client’s driveway. Luckily, mobile Internet is easy to come by and may be as simple as getting through your current mobile provider. Most phones now allow for tethering, in which your computer uses the data purchased for your cell phone. In this case, you’d want to purchase unlimited data, or the highest tier, to ensure you don’t incur expensive overage fees.

You can also purchase your own Internet hot spot. When the small Internet device is turned on, you have access to the data that you’ve purchased. It works the same way tethering your phone would work, and the cost is similar to those with your cell phone provider.

The Final Word on Mobile Business Costs

Running a business from you car may help you save on the expense of an office or co-working space. Still, there are plenty of financial details to consider, most importantly depreciation. While you can’t control a number of factors that affect it, you can put more time and money into keeping your car in good condition. Keeping it clean and maintained allows buyers to see more value when it comes time to sell.

Don’t forget to consider the numerous other financial factors and options such as tax deductions, refinancing your loan, and investing in the accessories and services you need to make your mobile office a place where you can be efficient and effective.

Holly Rollins

President at 10x digital
Rollins is the President of 10x digital, a digital marketing, content and SEO firm. She is also Senior Editor for Carpe Daily, hollymrollins.com and is named one of the top content marketers globally by the Content Marketing Institute: 2014, 2015 and 2016.

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