When you’re a business owner you want to keep your company running with the lowest outgoing costs you can manage, while maintaining the best possible service to your clients.
This naturally means that the vehicles you use for business will need to be financed on the lowest chattel mortgage rates that you can get, maximising the cash you have available to run your business.
If you’re needing a vehicle for your business operations, you can take full ownership of the car you'll need, without an initial large capital outlay, by using a chattel mortgage.This enables you to use your money to keep your business running.
But you can’t get something for nothing, so the lender will charge you interest on the amount you borrow, as well as taking security over the vehicle via the PPSR.
To get the lowest interest rate and keep your financial commitment manageable, here’s what you can do:
You don’t have to be a GST registered business to be eligible for a chattel mortgage - you can be an individual or a non-GST registered entity, as long as you can show that the vehicle’s primary use is for business.
This is handy to keep in mind, because lenders will usually offer a slightly lower interest rate on a business purpose loan like a chattel mortgage, and may have fewer and lower monthly account keeping fees.
You can get a chattel mortgage for any vehicle you'll use in your business, even a truck. If you are looking for a truck, you might use a truck finance calculator. Follow the link for some more information about truck finance.
If you’re going to sell your current vehicle privately, rather than trading it in at the dealer, you can maximise the value you’ll get back on the old car. Of course, you’ll need to buy the new car before you part with the old one, so you have something to drive for business and you don’t lose income due to lack of transport.
If you arrange a balloon payment at the loan, you can use the money from the sale of your old car to pay out the chattel mortgage. This way you’ll pay less interest during your loan term, and it gives you time to find the right buyer for the old car.
Some lenders will allow you to make contributions towards the final balloon payment when you have cash coming in.
They understand that in business, you might not make the same amount every week or month, depending on what industry you are in, and how your sales cycle flows.
Using a residual payment option means that you can reduce your regular loan payments, taking pressure off your weekly cash flow. Then when you have extra money coming in you can put it towards the residual value amount.
If your lender requires the residual to be paid in a single final payment, then it’s easy for you to put the extra cash into a special account so when the loan falls due, you’ll pay it out and the car is yours. Plus you’ll earn a little interest with the money in your bank.
If having a recent model car is important for your business, you can plan ahead and ensure that the balloon repayment matches the anticipated value of the car at the time when you plan to upgrade next.
This strategy keeps your repayments low, and lets you easily finalise the loan when you trade in and upgrade your vehicle at the end of the loan term.
One of the key reasons business owners choose to use a chattel mortgage rather than a lease is that the interest component of your chattel mortgage repayments are tax deductible.
The principle of the loan (the amount that you borrow) is not tax deductible because you can claim depreciation on the value of the car.
You can calculate your repayments using a chattel mortgage calculator.
By taking out a chattel mortgage with a residual value payment, you increase the amount of each repayment that consists of interest. This means that you’re increasing the tax deductible portion of your outgoing cash flow.
Unlike personal car loans, chattel mortgages aren’t regulated under the National Consumer Credit Protection Act (NCCPA). This legislation spells out all the documentation, strict credit checks and consumer protection that applies to personal car finance.
Under the NCCPA lenders and brokers are also obliged to provide you with all fee, charge and other loan information right at the start, before you apply formally for the loan.
Chattel mortgages do fall under the ACCC consumer guarantees and unconscionable conduct legislation.
If you’re ready to find out more about how a chattel mortgage can benefit your business, speak to one of our chattel mortgage brokers by calling 1300 722 210 for a quote and to find out what loan structures you can use.
If you’re short on time, you can fill out a pre-approval form. With this information, we’ll be able to get in touch with the info you need to get the right car loan for your business.