Car Loan Advice For Business Owners
As a business owner, there are a lot of decisions which generally land on your shoulders. Choosing the best car loan for your business is an important decision and could save you money in the long- term.
Take a bit of time to learn about the best car loans for business owners. Understanding the options you have available can really help your business.
Choosing the best business car loan
Business owners in Australia generally choose between three different types of business car loans. Finding the right business car loan for you will depend on a number of factors, so learn more about your options for business car loans.
Commercial hire purchase:
This is the most common type of business car loan. Sometimes referred to as Corporate Hire Purchase, it is a fixed rate loan where the lender will purchase the vehicle and then lend it back to their client for a set amount of time. This means that as a business owner, you have use of the vehicle without being its legal owner. You will gain ownership once repayments, including interest, have been made.
Whether or not a Commercial Hire Purchase is right for you depends on whether your business accounts for GST on a cash or accrual basis – if so, the loan can often be claimed as a tax deduction.
With a chattel mortgage, you will take ownership of the vehicle at the time of the purchase. Once we’ve helped you find the right lender for you, the lender will advance the funds needed to purchase the vehicle to you. The lender will then take a mortgage on the vehicle, which will act as their security for the loan.
Tax deductions are often available on a chattel mortgage when the vehicle is being used for a business purpose. A Chattel Mortgage is a good choice for business owners registered for GST on a cash accounting basis. Make a note for your next Business Activity Statement that you should be able to claim the GST from the vehicle’s purchase price as an Input Tax Credit.
This type of lease involves your lender purchasing the vehicle on your behalf. You will make regular repayments to the lender in exchange for the lease of the car. The vehicle remains the property of the lender and is hired out to your business. You should be able to use your car as an asset for your business. Although similar to commercial hire purchase, one of the major differences with a finance lease is that you will not have the option to purchase the vehicle.
A finance lease is a good option for businesses where cash flow is tight as it takes off the pressure of the initial large payments often required for vehicles. It is also suited for companies that need access to a range of vehicles without actually owning them. Finance leasing also has a host of tax benefits.
Which is the best business car loan for you?
This will really depend on your business, your financial situation and your current circumstances. Get in touch with us for expert advice—we will talk you through the business car loan options and encourage you to consider some of the following:
- Costs—consider your business’s cash flow and think about how much cash deposit you can offer. If you can put down a larger deposit, you’ll enjoy lower monthly repayments.
- Flexibility—think about whether you need flexibility with the loan or will you be able to commit to it long term?
- Ownership—this is something that may or may not be important to you. Think about how quickly (if at all) you want to take ownership of the vehicle.
- Tax—help us understand how your business operates and which business car loan will provide the best tax benefits for you.
Ask the experts
We have decades of experience in the business car loan industry which gives us access to a wide range of lenders. We want to help you get the right business car loan. For expert advice, talk to the experts on [phone].