A Guide To Getting A Car Loan With An ABN
Taking out a car loan with an ABN is a viable option if you’re a sole trader or a small business owner who’s planning to get a chattel mortgage. It has several advantages that a personal car loan does not provide.
In this article, we'll take a look at the different options for getting a car loan with an ABN.
Chattel Mortgage Car Loan
A chattel mortgage is a car loan for businesses where the business owns the car outright. The lender takes security over the vehicle during the loan term while you pay back the loan with interest.
A chattel mortgage often has an option for a residual or balloon payment to lower your monthly repayments. You can also provide a deposit to keep your repayments low.
If you belong to a company, trust, or partnership, or if you work as a sole trader, then a chattel mortgage could be the right car loan option for you.
Before you apply for a chattel mortgage, you'll need to make sure that your business has enough income to make the loan payments. If you've got assets in the business, this will help to support your application.
You'll need to have your ABN, BAS statements from the last two years, and some basic financial statements demonstrating your business health.
Car Loans for ABN Holders
If you're a sole-trader, sub-contractor or small business owner, you will be trading under a registered ABN. This means that if you use a vehicle in your work, you have access to some car loan options that could be more beneficial than a personal loan.
To apply for a car loan with an ABN, your ABN and GST registration will generally need to have been active for 12 months.
As long as you're using the car more than 50% of the time for your business needs, a chattel mortgage can offer you some great tax benefits.
You can also consider a low doc car loan, which allows you to apply for a self-employed car loan you need with minimal documentation.
Features of a chattel mortgage car loan with an ABN:
- Your business owns the car outright
- Claim GST, depreciation and running costs
- Residual payment to lower monthly payments
- Options for seasonal payment structure
- Lower interest rates as lenders take a 'fixed and floating charge' over the car
There are also some risks that come with a chattel mortgage too, such as the vehicle depreciating quickly, or not being able to pay the residual value at the end of the loan contract. Be sure to consult your accountant before selecting your self-employed car loan, and ensure that you are registered for GST.
Getting a Low Doc Car Loan with an ABN
If you don't have regular tax returns, there are options for getting a self-employed car loan using alternative income verification. A low doc car loan is essentially the same as a regular car loan once your application has been approved.
You can get a low doc car loan whether you run a business as a sole trader or you're working for someone else under your own ABN.
What You Need to Apply for a Low Doc Car Loan With an ABN
Before applying for a self-employed car loan, you'll need to make sure that you have enough spare income to make loan repayments. If you can put a deposit towards the car, this will reduce the repayments and increase your chance of approval.
When you apply for your low doc car loan with an ABN, you'll need to show evidence of assets and liabilities that you have, demonstrate your income, and ensure that any loans you currently have, such as a mortgage or credit card, are paid up to date.
Features of a Low Doc Car Loan With an ABN
- Apply with alternative income verification
- Lower interest rates when you are asset backed
- GST and depreciation tax benefits
- Fixed interest rate
- Opportunity to kickstart a new business with the right car
- Improve your chance of future business loans.
The risks of taking out a low doc car loan are similar to a chattel mortgage. Your self-employed low-doc car loan is usually secured against the car, so if you can't meet the loan repayments, the car could be repossessed.
Make sure that you discuss the loan with your accountant, and that you are 100% honest throughout the application process so that you are matched to a car loan you can afford.
|Case Study: Joyce Starts a Massage Business|
Joyce has recently completed her massage qualifications and she intends to become a full-time massage therapist. She's currently still working part-time as a social worker, but she's been providing casual massage services for almost a year under her registered ABN.
Joyce will provide in-home massage services, so she needs to transport her massage table. It won't quite fit into her Fiat 500.
Joyce calls Positive Lending Solutions about getting a car loan with an ABN for a 2015 Renault Kangoo. With minimal documentation, Joyce's approved for a low doc car loan and on the way to becoming a full-time massage therapist.