To optimize profits, companies usually tighten their budget, focusing on more productive posts.
For example, some companies choose renting cars than buying,because itrequires a lot of investment.The unspent money can be allocated for other posts to generate even moreprofits.
But, is it true companies will gain more profits by implementing this strategy?
Financially, there are several benefits if a companychoose to rent a car for daily needs. Down payment, annual tax, and routine maintenance costs can be excluded from company’s budget.
Quoted from Kompas Otomotif (Saturday, October 1, 2016), there are several things to consider when renting cars for company, as this might help company increasing the company’s profits.
First, the company can choose cars with suitable specifications to support office operations. Second, car rental agency usually has already had their vehicles covered by insurance. Lastly, replacement cars are available if the previous car is experiencing troubles.
With such benefits, companies can plan an effective transport budget because all the costs have been calculated upfrontevery month.
It’s different if the vehicles were owned by the company. Unexpected maintenance costs must be taken into consideration in budgeting.
The company mustput aside extra budget to anticipate any broken spare parts that needs to be replaced, even though it has not passed its expected lifetime.
Moreover, it will also affect the company’s operational activity if the car breaks down and the repair process takes more than one day.
Other things to consider is that company must insure the car as a protectionfrom risks, including accident.
Despite the huge investments needed, there is still added value from buying a car as an inventory. The car can be used anytime, meaning that there is no extra cost if it is used over time.
As such, decision should be based on the company’s needs. Therefore, before choosing which step to take, the company must evaluate what its conditions and needs.