You may need a car to run your business in Australia if you own a business.
The range of industries that depend on cars in Australia is vast, whether it’s transporting goods or people from one place to another, taking clients out to lunch, or getting you from one jobsite to the next.
Deciding to buy a business vehicle is a difficult decision. That’s why we are happy to offer some guidance to help you confidently navigate your car loan options.
- 1 What are the benefits of business car loans?
- 2 What is the best way to finance a business car?
- 3 Tips to get a loan for your business vehicle
What are the benefits of business car loans?
A business loan for car care is one of the most popular ways to obtain it. The loan is for a vehicle that will be used by your business.
A business car loan is usually a secured loan. This means that the lender can take the vehicle if you default on the loan. These types of loans are sometimes called a chattel loan. Because you can offer your car as collateral against the loan, interest rates for chattel mortgages are often lower than those of unsecured business loans.
These are some guidelines to consider when you’re thinking about purchasing a vehicle for your business.
Potential tax benefits
There are potential tax advantages to buying a vehicle for your business. You might be eligible to claim GST for your car if your business is GST-registered.
You may also be eligible for other tax deductions, such as:
- Use oil and other fuels
- The premiums for your vehicle policy
- The interest you pay on your car loan for business
- Registration costs
- Any depreciation (which means the decrease in value of business assets, such as a car).
If you are unsure about the tax deductions available to your business or have questions about your loan, you can seek professional advice from an accountant or consult the ATO about business car loans and small-business vehicle expenses.
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What is the best way to finance a business car?
There are many financing options available for business vehicles. The decision about which financing option is best for your company depends on your personal situation and business needs. The following are your options for vehicle finance:
- Chattel Mortgage
Chattel mortgages are essentially secured loans for commercial vehicles. They offer lower interest rates and the option to own the asset once the loan has been repaid.
- Unsecured Car Loan
A lender may lend you money to finance your business, but the funds aren’t secured by any asset. Unsecured loans have lower interest rates than unsecured loans.
- Finance Leases
Finance leases are another way to finance your vehicle. You pay regular lease payments to the financier and the lender takes ownership of the vehicle. The lease can be extended at the end of its term. Finance leases have their downsides. For example, you may not own the vehicle and your insurance premiums could be higher.
- Commercial hire purchase
A hire purchase arrangement is similar in nature to a finance lease. However, at the end the term you have the option of buying the vehicle. Therefore, you usually own the vehicle at its end.
Tips to get a loan for your business vehicle
Car financing can be complex so we offer some tips on what to do before you buy your business vehicle.
Know your budget
Your budget is a good place to start. Most car finance options allow you to purchase used or new cars. However, if you are unable to afford a new car, it is worth assessing your income. This will help you determine how much you can spend each month on your monthly repayments. Make sure to include other fees, charges, registration costs, insurance, and any other running expenses when you are preparing your budget.
Learn about your credit score
Depending on the business setup, you may be eligible for a loan under your personal name and/or your company name. Your personal credit score and business score will impact the likelihood of your loan being approved.
Professional advice is recommended
It is best to seek independent tax advice before comparing business car loans. This is because tax agents can best assist you in this area. Credit providers that have an Australian Financial Services Licence (or Australian Credit Licence) are not able to give personal advice about your individual financial situation or business finances.
Comparing business auto loans
As with any big decision, it is natural to want to compare all business car loan options. If you are a successful business with good credit, you might have the best choice. If you have a poor credit history or your company doesn’t have credit information, there might be fewer options for loans.
For every Australian Credit Licence-holder, lending criteria apply
Lenders will have their own lending criteria. You may be denied eligibility based on your business use or your credit rating.