Buying a Van for Your Tradie Business: What You Need to Consider
About the Author: Ashley Thomson
Planning the growth of your trades business means that there are some key financial decisions you’ll have to make. Even when you have a good pipeline of jobs booked and cash flow is positive it’s worth weighing up what you spend your money on.
Buying a vehicle for your tradie business can be exciting; it’s not just a big present from the company, it’s a marker of growth. It means you have employees on your books and you have jobs to get them to.
I’ve been a business coach to tradies for long enough to know that even the most economical electricians and profitable plumbers can make rash decisions when it comes to buying work vehicles. I’ve prepared this guide to help you understand and assess the factors involved.
Do you need a vehicle for each tradie?
The first consideration is to work out how many work vehicles you need.
Think through the way you allocate team members to jobs. If your jobs are always carried out by 2 or more people, you could have a model of 2:1 workers per van. Having some team members car-pool while others get a vehicle allowance for using their own vehicle can minimise costs and provide flexibility.
Consider the functionality you need in a vehicle
Cargo space and payload capacity: Think about the tools and equipment you typically need to transport. Vans are good for holding hand-held tools and lots of items of small stock and consumables like cables, conduit, tape that are common for the electricians I coach. On the other hand, vehicles with open trays such as utes and trucks are good for carrying larger equipment and transporting bigger volumes of site materials such as piping, ladders, flooring, rubbish.
Towing capacity: If your crew needs to haul trailers with generators or other heavy equipment, consider the vehicle’s towing capacity. Be aware that towing a weight above the vehicle’s capacity could void your warranty if there’s engine damage. Or if there’s an accident your insurance claim could be denied.
Organisation and storage: Look for features that will suit your storage needs and make tools and materials easy to access and safe to transport. This could include capacity for built-in shelving, compartments, or lockable cargo areas to secure equipment and prevent damage in transit.
Safety features: Prioritise vehicles with good safety ratings and features like airbags, blind-spot monitoring, , and backup cameras. Features like collision avoidance systems can be especially valuable for work vehicles driven on major roads with heavy traffic and high speeds. Many of the commercial maintenance plumbers we coach service factories in the industrial districts and their teams are often using busy freeways like Eastlink, Monash and Western Ring Road, so vehicle safety is paramount.
Durability and reliability: Choose vehicles known to have low maintenance requirements. And on that note, also consider the availability of mechanics for the make of your vehicle. In Australia, most dealer vehicles include 5-year servicing, so you should be pretty confident that your vehicle can be serviced easily. But think about who will service your van or truck after that. Some European makes can only be serviced by specialist mechanics, which puts your business at the mercy of their availability and pricing.
If your business relies on vans to do a job, consider the cost of having your van off the road and out of action. (Meanwhile, your lease repayments don’t stop.)
Research common maintenance issues for specific models. Speak with other business owners and get their thoughts from their first-hand experience with their vehicles.
Understanding the Operating Costs of Work Vehicles
Whether the purchase price of your vehicle is an all inclusive “drive away” or a sticker price with add-ons generally depends on whether you buy a car from a dealer or privately. Whatever the upfront costs are, you should also make sure you understand the likely operating cost of your vehicle so you weigh up your options. Start by taking these costs into account:
Fuel efficiency: With today’s fuel prices, fuel efficiency is a major consideration. Look for vehicles with good mileage or consider electric or hybrid options. A Tenfold tradie business coach can help with a financial model to assess the cost effectiveness of diesel/petrol/electric vehicles.
Maintenance costs: Research the typical maintenance schedule and costs associated with different vehicle models. Regular maintenance is crucial for safety and longevity of the vehicle.
Financing options: Explore different financing options like leasing to determine the most suitable approach for your cash flow. Finance costs can be a less visible operating expense for vehicles so it’s worth having a clear idea of how much you’ll pay and over what term. Most dealers will offer (or even pressure) their finance as part of the sale deal. We recommend speaking with a commercial finance specialist like Conquer Finance. They’ll give you an objective view of your finance options and help with matching the term and repayments to suit your business cash flow.
Fringe Benefit Tax (FBT): In Australia, you may need to pay FBT on the value of the car benefit you provide to employees if the vehicles are driven home or if you allow personal use. FBT could add a tax burden that your business might be better off without.
This may be less applicable for specially designed work vehicles such as tip trucks.
It (almost) goes without saying that you can claim tax deductions for business-related expenses associated with company vehicles.
Why you might not want to buy a work vehicle
As with any big financial decision it’s good to have a full view of the options available to you. There are several reasons why buying work vehicles for your electrical contracting business might not be the best option.
High upfront and ongoing costs: Purchasing vehicles requires a significant initial outlay: the ticket price, registration, stamp duty, dealer charges. You may have additional set up costs such as accessories like tow ball, interior fitout, branding wrap, GPS tracking, and dashcams.
Additionally, you’ll have ongoing expenses like maintenance, repairs, fuel, and insurance for each vehicle. These costs can add up quickly, especially if you have a large fleet.
Responsibility for Accidents: You’ll be liable for any accidents or damages that occur while employees are driving the vehicles, even for personal use.
Security: If your company vehicles are being parked overnight at your employees’ homes instead of in a secure yard or locked up in your factory there could be greater risk of the vehicles being stolen or damaged.
Environmental impact: Consider the environmental impact of a company vehicle fleet. If you’re pitching your business as environmentally friendly your clients may have a concern if you’re not using fuel-efficient models.
By carefully considering these factors, you can decide whether buying work vehicles is the right choice for your tradie business.
Pros and cons of buying new work vehicles versus used
New Work Vehicles – Pros and Cons
| Pros | Cons |
|---|---|
| Warranty: New vehicles come with a manufacturer’s warranty, offering peace of mind and potentially lower repair costs in the initial years. | Higher Upfront Cost: New vehicles carry a significantly higher purchase price compared to used options. |
| Servicing: Most dealer sold vehicles include capped price servicing for an agreed number of years. Dealer servicing also tends to be faster as they have continuity of supply of parts and labour. | Rapid Depreciation: New vehicles depreciate quickly, especially in the first few years, which can be a significant financial loss. |
| Latest Technology: New vehicles often include the latest safety features like automatic emergency braking and driver assistance systems, enhancing employee safety and potentially lowering risk of accidents and therefore insurance claims. | Higher Insurance Costs: Comprehensive insurance for new vehicles is generally more expensive. |
| Fuel Efficiency: Newer models tend to be more fuel-efficient, reducing operating costs over time. |
Used Work Vehicles – Pros and Cons
| Pros | Cons |
|---|---|
| Lower Cost: Used vehicles offer significant savings upfront compared to new models. | Unpredictable Reliability: Used vehicles might require more frequent repairs and maintenance compared to new ones. There’s also a higher risk of encountering unexpected breakdowns. Remember, if your business relies on your van to get a job done, you can’t afford to have it off the road. |
| Slower Depreciation: Used vehicles have already undergone the initial depreciation hit, meaning their resale value is less likely to plummet as quickly. | Limited Warranty: Used vehicles typically come with limited warranties or none at all, meaning you’ll shoulder more repair costs. |
| Wider Selection: The used market offers a broader range of options in terms of makes, models, and features, potentially allowing you to find a great fit for your specific needs. | Outdated Technology: Older models might lack the latest safety features and fuel-efficient engines, potentially impacting safety and operating costs. |
| Availability: If you need a van or ute immediately, you may be able to get a used vehicle faster than the production and shipping times of buying through a dealer. | Unknown History: It’s crucial to thoroughly research the vehicle’s history to avoid major problems down the road. Consider getting a pre-purchase inspection by a qualified mechanic. |
| Theft target: Without the immobilisation tech that comes standard in new vehicles, older vehicles are easier to break into. Not only is the vehicle at risk of being stolen but all the tools and materials inside could also be nicked. |
Wrapping it all up
If budget is a major concern and you’re comfortable managing potential repairs and trying to cover off the risks, then well-maintained used work vehicles could be a good option.
If reliability and minimising downtime are top priorities, and you’re willing to invest in the upfront cost, then new work vehicles might be the better choice.
