Everything you need to know about business car loans
Today's lowest rate is 4.04% (Comparison 4.58%*)
If you’re looking to invest in vehicles for your business, there are numerous options for business car loans. These include a chattel mortgage, hire purchase, lease, low doc loan, and novated leasing.
Each type of business car finance offers its own features and benefits that may suit different business needs.
Businesses of all sizes can apply for vehicle financing. Whether you’re buying your first business car or upgrading your fleet of vans, the right vehicle financing can help you grow your business.
Finding the right business car loan
It’s important to find a tailored business car finance option to suit your business needs. There are flexible commercial options for anyone who uses the vehicle predominantly for business, with a range of tax-effective options to suit the accounting structure of your business.
To help you decide which business car loan is right for you, consider various factors such as whether you want to retain ownership of the vehicle, what the purpose of the vehicle is, and the business type.
Some financing options allow you to retain ownership of the vehicle from the start, while others have ownership remain with the lender until the loan is paid off. Some leasing options do not grant ownership at all.
Consider whether you want to be able to claim the vehicle as a business asset, as this will generally not be possible unless you have ownership of the vehicle.
Think about how often the vehicle will be used. If it will be used regularly for business use, you may want to own it by the end of the loan term, whereas if you only need it part-time, leasing may be better than ownership.
The size of your business and your budget may also impact what car finance option is best suited to your business needs.
Types of business car loans
There are numerous types of business car loans available. Consider what your needs and budget are to help you determine what is the best loan option for your business.
One of the most common types of loans for commercial lending is a chattel mortgage.
A chattel mortgage involves the lender lending you money to purchase a vehicle for your business. The lender uses the vehicle as collateral or security while you pay off the loan.
With a chattel mortgage, you take ownership of the asset (the vehicle) at the time of purchase rather than at the end of the loan term. This means the asset can be used as a taxable offset (in most cases), so you can claim the GST on the purchase price and claim the depreciation of the asset and interest charges on the loan.
A chattel mortgage is a flexible business car finance option with 1-7 year loan terms and residuals available. It is a versatile option for most business types.
Hire purchase, also referred to as commercial hire purchase, is a type of business car loan where you hire an asset with the intent to purchase it at the end of the loan term.
During the term of the loan, the lender owns the asset. This means the tax offsets are different from an accounting perspective, as it’s not an asset owned by the business. You also have the option to decide whether to include a residual or not.
With hire purchase, you make fixed monthly repayments over the loan period and take ownership at the end of the loan term if you’ve paid off the loan amount.
Similar to hire purchase, a lease uses the same ownership principles, with the asset owned by the lender for the term of the loan.
The lender purchases the vehicle on your behalf and leases it back to you, while you make payments during the loan period to pay back the lender. Once the lease expires you can pay off the remaining value on the lease and take over full ownership of the vehicle.
Leasing also has a regulated residual value calculated off the term of the loan.
Also known as No Doc, Self Doc, or Lite Doc, Low Doc is a type of business car loan that requires little to no proof of the borrower’s financial position.
Instead, this finance option relies on the assessment of the tenure of your business, you as the borrower, and the guarantor’s financial position, as well as the asset being purchased.
This is a great option for businesses with little or no ability to demonstrate or prove capacity to repay the loan, such as small or new businesses.
A novated lease is an arrangement between you, your employer and the lender in which your employer is responsible for your car loan. The employer arranges for the payments to be taken directly from your pre-tax salary.
If the vehicle purchased is predominantly for work purposes, this can be a tax-effective solution for business car finance.
Other finance options
Another option for business car finance is a business loan. You can use standard business finance to fund the purchase of the car.
Many regular car loans can also be used to finance a business vehicle. Though keep in mind this option does not include tax benefits many other options provide when financing a business vehicle.
Offering low rate commercial loans with flexible terms and residuals options, 360 Finance can help you find your ideal work vehicle, or an entire fleet for your business, as well as organise your business car loan.
* Your actual interest rate will be based on a number of factors, including the type and age of the asset you are seeking to purchase; the information you provide during your application and the term of the loan. This rate may be different from our lowest advertised rates. The Comparison Rate is calculated on a Secured Loan of $30,000 fixed for a term of 5 years, effective 01/08/2022 and subject to change. The Comparison Rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts may result in a different comparison rate.
A comparison rate is a rate that helps you work out the true cost of a loan. It reduces a single percentage figure that includes the interest rate plus most fees and charges relating to the loan. The comparison rate allows you to compare different lenders to find out how much it will cost you. Definition Source: www.moneysmart.gov.au
A comparison rate is a rate that helps you work out the true cost of a loan. It reduces to a single percentage figure the interest rate plus most fees and charges relating to a loan. The comparison rate allows you to compare loans from different lenders to find out how much it will cost you. Definition Source: www.moneysmart.gov.au