Is it okay to have debt on a car for business?
Dear Dave,
I put a lot of miles on my car every year. It’s the only car I have any debt on. We have a van for my wife and kids and a truck that we play with on the weekends. Both are paid for. The car I have debt on is a business car and I put about 30,000 miles a year on it. This is my only debt, other than my mortgage. My company reimburses me monthly for the cost of this car, no matter if I have a loan or not. My thinking on this car is that it’s a business tool and the business is paying for it. If I weren’t in this business, I wouldn’t have it. So the debt is Okay because it doesn’t impact my home income or my savings. Am I on track or am I way off track?
Andy
Pittsburgh, Penn.
Dear Andy,
Well, this is kind of thinking is normal, but I would respectfully disagree with you. If you didn’t have the debt, you’d have the money, which you could then invest and make work for you. No matter if it’s consumer or business, you still lose the power to take those dollars you’re spending on payments and interest and invest them – or play with them, whatever you wanted to do with them. Instead, you’ve lost the use of that money.
That’s the biggest thing debt does. It’s an acid that eats up our ability to use our income to earn more money. That applies even in a business setting. For instance, the radio equipment and cameras in my broadcast studio cost us around $100,000. That equipment makes me money, so is the debt not Okay in that situation? No, because I would still have to pay out to some bank what would have been profit. So I don’t have payments on this equipment.
You can limit some of the damage by driving a minimal vehicle. Even if your company has some guidelines about what type or condition car you drive, you may still be able to get by with a nice older car – for instance, a seven year old Mercedes Benz 300E that you run 250,000 – 300,000 miles on can still look brand new. I know some companies may require you to drive a two-year-old or newer car, but I’d still recommend having the car paid off to minimize the damage to your finances.
Dave
Lost job, might need to move
Dear Dave,
The job I currently have has virtually evaporated. I have two job interviews next week. The weekly pay for both is essentially the same. One is short term: 9-12 months. It’s in another state, but offers a per diem so I wouldn’t have to move there. They would just pay my travel expenses to go back and forth. The other job will last at least three years, but I’d have to move to another state which will throw me about $3,500 further into debt. That’s the estimated cost of having professional movers transfer all of my belongings. I don’t want to go further into debt and the company won’t pay for moving expenses.
I’m single and my only debt is two credit cards with balances totaling about $11,500. I’m reluctant to move and both jobs are good ones, but the longer-term assignment has a better opportunity for a permanent position in the long run and I like what I would be doing in the job.
Michael
Paducah, Ky.
Dear Michael,
I’d move and I’d try to negotiate to see if I couldn’t get them to pay some of it. I know they’ve said they won’t pay for moving expenses, but they sure won’t if you don’t ask. Let them know you really want to do this and the only thing standing between you and taking this job is $3,500 in moving costs. Ask them if they will help you so you can take the job.
Honestly, if I’m sitting looking at a guy I want on my team and he says, “Hey, look, I’m here and I want to do this. I’m excited about being on your team. The pay is good and I like what I’ll be doing. I could start immediately. The only thing holding me back is this move. Can you help me with this moving expense? I’m trying really hard to get out of debt. I don’t know how you feel about debt, but I’m really excited about being debt-free. And going further into debt to make this happen is almost more than I can swallow. Can you help me make this decision?”
You might be surprised. They might offer to pay $1,000 of it. You never know. I would ask again, but I would make this move.
Dave
Disclaimer: Questioner’s identities have not been verified by Dave $ays column or this website.
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