How does a business car loan work

A business car loan, also known as a commercial car loan, is a type of finance that you can use to purchase a vehicle for your business.

Cars, vans, and certain types of trucks are covered by these loans. Business car loans are similar to personal car loans in that you borrow money to buy a car and then repay it over time, plus interest.

People and businesses seeking financing for vehicles to be used in their businesses or for their workers are eligible for car loans.

 We can save you time and money by finding you the best business car finance from hundreds of loans offered by almost 30 lenders. We do the the hard work so you can concentrate on doing business.

 Business car loans come in a few different varieties that work in different ways. What they all have in common is that they allow you to get the vehicles you need to conduct your business without having to pay for the full cost up front. This frees up funds to be used for other business needs. You then make regular repayments to the lender which can be funded with business revenue.

Benefits of business car loans

When you’re buying a car you have two options. Either pay cash for it upfront or finance it with a loan. While car finance might be something you’ve shied away from in the past, there are some advantages of going with this option.

  • You can get a loan for the entire cost of the vehicle. You don't have to wait until you've saved up all or even a portion of the money if you need a car right now. In just the time it takes to prepare your vehicle and organise the paperwork, you can drive away in a new automobile. Car financing makes a lot of sense if the monthly loan payments are affordable.

  • Vehicle financing may be tax deductible. If you own a business and it borrows money to buy a company car, the finance charges may be tax deductible. Check with your accountant, but typically you can deduct interest on a car loan, insurance payments, repairs, and maintenance, among other things.

  • You can put your money towards more vital things. Spending a substantial chunk of money on a car upfront isn't always the greatest decision, particularly if you have a family or a company to support. You may need the money in the future for an unforeseen event, such as a medical bill or a business emergency.

Business car loan options

Chattel mortgage

A chattel mortgage (also known as a bill of sale or equipment loan) is a financial arrangement in which money is borrowed to acquire commercial equipment or vehicles, and a charge is taken over the financed equipment, meaning the lender can repossess it if the borrower misses repayments.

  • The borrower owns the equipment
  • It can be fully financed or the borrower can contribute some equity (e.g., a deposit or a trade)
  • A balloon payment can be incorporated
  • A tax deduction can usually be claimed on the interest payments and depreciation on the vehicle
  • If you're registered for GST, you may typically claim the GST on the purchase price.

Lease

A finance lease is a vehicle financing arrangement in which the lender keeps the title and the car is leased to the borrower for a certain period of time at a set rental price.

  • The financier will own the vehicle
  • Repayments are often fully tax deductible 
  • While there is no assurance of ownership, it is common for the lender to offer the equipment for sale at its residual value at the conclusion of the term.

Equipment finance

Most commercial equipment can be financed, including:

  • machinery 
  • tools
  • warehouse machinery
  • specialised equipment for health care personnel 

The most common kind of equipment financing is a chattel mortgage. With a chattel mortgage, you source the equipment and your company owns it from the start of the loan period, allowing you to keep your operating capital free. The loan is secured against the acquired equipment, and if the equipment is employed to generate revenue, your company can usually claim interest and depreciation.

We can help you every step of the way.

Just tell us your story and we’ll find you the best loan for you needs. We do the application and arrange settlement for you. Just pick up the keys and hit the road!

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We have both Chattel Mortgage and vehicle leasing options from a variety of lenders to suit your needs.

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Business car loan requirements

To get a business car loan, you must:

  • Be an Australian tax resident. This means your company must be headquartered, registered, and operating in Australia. You'll need an Australian ABN and must be paying Australian taxes.
  • Make use of the vehicle for business. You must drive your car exclusively or mostly for business reasons as part of the loan conditions. As a result, you may be unable to lease or purchase a vehicle that is inappropriate for your business (for example, a Porsche for a gardening business).
  • Have a profitable business. Your company's financials must demonstrate that it is profitable. This, in turn, will prove your ability to repay your debt.
  • Have a good credit score. If you have strong credit, leasing or purchasing a vehicle will be easy. 

You may be required to give the following information when applying for a car loan:

  • Cash flow statements 
  • Financial statements
  • Proof of business ownership (if applicable)
  • Proof of automobile insurance

How to apply for a business car loan with CarLoans.com.au

Applying for a car loan with CarLoans.com.au is easy!

CarLoans.com.au has simplified the process of finding the best business car loan rates and getting business car finance. Our four-step process saves you time and gets you in the driver's seat quicker.

  • Tell us what you need and apply online or over the phone.

  • We'll locate the best loan for you.

  • We’ll take care of the application and the settlement on your behalf.

  • Drive away your new vehicle!

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Frequently asked questions

Yes, a business car loan can be used to purchase a used vehicle. Many lenders, though, set an age limit for the vehicles they will finance. Some are as low as five years old, although some lenders are prepared to finance vehicles as old as 12 years. Many traditional lenders may turn you down if your automobile is vintage. However, there are also plenty of financiers that specialise in classic automobiles.

Yes, tax benefits are one of the main reasons that people employ a business car loan. In the year the asset is acquired or used, eligible firms can claim an immediate deduction for the business share of the vehicle's cost. Other tax deductions you may be able to claim, at least with chattel mortgages, are:

  • The 'input tax credit', which is a GST credit applied to the entire purchase price.
  • Depreciation of your vehicle, which could be more than a quarter of its value in just three years.
  • The number of kilometres driven and the amount of petrol consumed, as well as registration and insurance.

Lenders want you to buy a reliable vehicle. For that reason car loans typically have a $5,000 minimum lending amount. They often have upper limits too, typically around $250,000.

Yes, most lenders will allow you to incorporate a balloon into your business car loan. Businesses are one of the main users of balloon payments, because it allows them to keep their repayments low while the vehicle is being used, and then pay off the balloon with the proceeds

Pros

  • You won't have to worry about weekly or monthly repayments 
  • You won't have to pay interest
  • Leaving your cash in the bank will yield you minimal interest at present rates anyway

Cons

  • You'll have less money for other investments and unanticipated situations
  • You may be able to obtain a better return on your money if you invest it something other than a vehicle
  • You'll have to save for longer (wait) to get the vehicle

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