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Some of the best business car finance options and which one may be the right one for you

Sep 25, 2021 | Insights

Take a look at how to apply for business car finance in Australia.

 

Having a reliable vehicle can be essential for many businesses and purchasing one may be tax-deductible. However, a lot of business owners may not be able to pay for a quality vehicle outright. They can be expensive, after all!

If this is the case for you, business car finance may be an option, even if you have a bad credit history.

What is business car finance?

Business car finance is basically a car loan that is specifically for businesses. Businesses can include sole traders; companies; partnerships and trading trusts.

Different arrangements can be made, including leasing a car, which may give you the option to upgrade to a newer model in the future or eventually purchase the vehicle outright.

When choosing the most suitable form of car finance for your business, it is important to consider investigating your options thoroughly, to discover which option may be best for you. 

Types of business car loans

Line of credit: A line of credit loan may give your business access to an agreed amount of credit to use as you see fit. With a high enough line of credit, you may be able to purchase one or more vehicles. It can, however, be difficult for some small businesses to secure a high enough line of credit to cover a business vehicle as well as other business expenses.

Hire purchase: With a commercial hire purchase, the lender purchases the vehicle and then the business may ‘hire’ the vehicle from the lender for a set period of time until the vehicle is paid off. This could be a good solution if you aren’t sure how long your business will need the vehicle for.

Lease: Leasing a vehicle is a form of rental that could save you from buying outright. For items with high value such as a car or another vehicle, there are often two styles of lease available:

  • Finance lease: A finance lease can be similar to a hire purchase set up in that it can allow the borrower to potentially own the vehicle at the end of a set period of time. The borrower may then have the option to keep the vehicle or to return it at the end of the lease period. The borrower may have to pay interest on their purchase but because the business should be responsible for maintenance and repair costs, the risk to lenders can be low, sometimes resulting in better rates. Low interest rates can be what makes leasing more appealing to many businesses.
  • Novated lease: A novated lease can be a little more complicated. This is a three-way agreement between a lender, an employer and an employee. In short, the employer often takes an agreed-upon amount of money out of the employee’s salary in order to pay the lease. This usually gives the employee free use of the vehicle, with the added benefit that the repayments should be excluded from income tax. As a business owner, this may be a good solution if you don’t want to purchase a vehicle for your employee that you want to drive yourself.

Small Business loan: Small business loans may be suitable for any investments you need to make to set up or maintain your business. Vehicles and other big-ticket purchases such as computers and software can be good assets to acquire with a small business loan. You may decide to take out a loan for a lump sum then figure out where the money needs to go.  

Chattel mortgages in Australia

The final option for business car financing may be a chattel mortgage. Australia is one of many countries that offers this form of loan for businesses.

A chattel mortgage is not exactly the same, but may be considered likened to a secured car loan but for business use instead of personal use. This means that the lender may have the option to repossess the car if you fall behind on your loan repayments.

Chattel mortgages can be a good way to secure a business car loan if you have a bad credit history. Because they can be lower risk to the lender, chattel mortgages may be more likely to be approved if your credit history is not considered quite up to scratch. 

What to look for in a business car loan

Whenever you are looking for any kind of loan, it is important to talk to your lender to discuss your options and negotiate for the best deal possible. You might consider looking for loans that provide lower interest rates and no hidden fine print that could turn a good deal into a trap.

One way to know you could be working with a great lender is if you receive personal service via phone or text. Speaking to someone who is experienced in lending can allow you to ask questions and get to know more about the lender. 

If you are looking for a trustworthy lender and you have experienced a bad credit history, contact Finance One Commercial. Our highly experienced staff can work with you to help you achieve a loan to suit your business needs.

Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.

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WRITTEN BY

WRITTEN BY

Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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