Whether you’re a tradie or a travelling salesman, a reliable set of wheels for your business can mean the world, but how do you finance one?
It’s pretty well established how simple applying for a private car loan can be, but applying for a business car loan can also be a short process, and can also yield some good tax benefits. Here are five things you should consider with a business car loan.
They can be called ‘chattel mortgages’
Chattel mortgages are essentially secured car loans for businesses. With a business car loan or chattel mortgage, you borrow all or part of the car’s value from a lender, and repay this amount over a period between three and five years, and sometimes up to seven.
Many of the same lenders you have come to associate with normal car loans also lend to businesses. If you are getting a business car loan, you usually need to supply your Australian Business Number (ABN) and have used it for two years, which keeps everything above board for tax purposes.
You can claim interest as a tax deduction
Another benefit of purchasing a car under your business is being able to claim the interest you pay on your car loan repayments back on tax. A $30,000 car loan repaid over 5 years with a 5% interest rate could result in $4,568 extra in interest paid over the life of the loan. Being able to claim that at tax time could net some savings!
Consider the instant asset tax write off
Eligible businesses can claim an immediate deduction for the business portion of the cost of the asset in the year the asset is purchased or used.
Eligible businesses include ones with an aggregated turnover of less than $50 million in regular circumstances. However, during COVID-19, this was raised to $500 million, and then again until 30 June 2022 to $5 billion.
The usual asset threshold is also commonly $30,000, but during COVID this was raised to $150,000. This means that you could feasibly write off say, the full cost of a Toyota Landcruiser, which has a drive away price of more than $100,000 in some specs.
Consider other tax benefits
Other tax items you can claim, at least with chattel mortgages, include:
GST on the full purchase price, called the ‘input tax credit’.
Depreciation of your vehicle, which can depreciate by more than a quarter in as little as three years.
Claiming kilometres and fuel used, as well as registration and insurance.
Compare your car loan options
Business car loans aren’t just limited to chattel mortgages. Other business car financing options include:
Commercial hire purchases
Vehicle and novated leases
Carloans.com.au works with nearly 30 lenders to secure a business car loan with a competitive interest rate and the right terms for you.
If you’re ready to finance your next business car purchase, speak with one of our car loan specialists today.