Getting vehicle finance for your business is generally not difficult. Most car dealers are satisfied with a cash deposit and a reasonable credit score. As a business owner, there are a couple of factors you might have to consider when making the decision to apply for vehicle finance.
Consider that as part of your company’s production or value chain, you company car is not a luxury item, but an investment that will be part of your business’ assets. It’s financing, insuring and other costs will have an impact on your company’s finances.
There are a number of car loan options available for businesses and it is important to choose the right one for your business to avoid any headaches.
The first thing you need to do is decide the kind of financing you need. You need to be clear about the kind of car you need and what you will be using it for. Some car loan options allow you to borrow or lease a vehicle without ever owning it whilst others allow you to own the car outright. These options have their own unique advantages and disadvantages, read on to find out what is available out there and find the option that is right for you.
Business Car Finance Options
Business car loans
You can apply for a business car loan if you want to buy a car in your name or under your business name. You will be required to make fixed monthly payments over a specific period. When applying for this type of loan you may be required to provide proof that your finances are strong enough. If you have business partners, a personal guarantee might also be required from each of the owners. You can get car loans for your business from your bank, credit unions or from online lenders. Business car loans usually require a 10 to 20% deposit.
– An outright purchase means you can drive the car out of the lot.
– You are able to select or negotiate the terms of your finance, the deposit and the interest.
– You have the freedom to pay extra to reduce the loan term or interest.
– An outright business car loan can be a direct drain on your business capital.
– You need to ensure adequate cash flow for maintenance, repairs and upgrades to meet changing conditions.
– Cars depreciate in value which makes them a poor long-term investment.
Commercial Hire Purchase
Under a commercial hire purchase option a lender will buy the car on you behalf. You as the business owner hires the car back from the lender at a weekly or monthly rate. When all the repayments have been made, including balloon payments, the car title can then be transferred to you making you the legal owner of the car. Terms range between 1 and 5 years.
– Monthly repayments are less than conventional business car loan payments.
– No down-payment required and you pay less in sales tax because you are not actually buying the car.
– You get to own the car after the hire purchase period ends.
– You don’t really own the car so if you default, the lender might be quick to repossess.
– The lender will also insist on insurance and might even prescribe his own preferred insurance company.
– That ‘balloon’ payment means that you may pay much more in the end when you take ownership of the car.
Leasing a vehicle allows you to use a car without really ever owning it. What happens in this case is that the lender buys the car on your behalf and leases it to you. You will be required to make monthly lease payments until the lease period lapses. When you reach the end of your lease period you can decide to either pay the remaining value of the car and take ownership, refinance the lease or trade the car in for a new one. This option does not usually require a deposit or down payment.
– You can arrange a lease without a down payment.
– Warranties often last the length of the lease which means you won’t have to worry about maintenance bills.
– The key benefit of getting into a leasing arrangement is the fact that the cost of the car can be written off as a business expense which means tax savings for you.
– You don’t have as much freedom as you would have if you bought the car from the beginning. The lender/dealer may charge you extra for going over the mileage limit.
– The lender may also demand that you take a particular kind of insurance.
– It will cost you a great deal if you break the lease before the lease period ends.
A Chattel business loan is one type of business loan used by Australian businesses to finance their business cars. With this type of car loan a lender provides the funds for a car or fleet. The business owner pays the loan and the interest. This option is different from hire purchase and leasing in that the business owner becomes the car owner from the outset.
– You own the car
– Contract terms are often flexible
– Lower interest rates
– Unlike the lease option, payments aren’t fully tax deductible.
– You take on all responsibilities of owning a car like getting insurance and maintenance fees.
Alternative Car Loan Options
Commercial line of credit
Do you need more than one car for your business? Some businesses require a fleet of cars like truck or vans. You can build your fleet by getting a commercial line of credit from a lender. You won’t have to spend a lot of time and effort getting approved for individual vehicles, but can get financing for multiple vehicles at the same time. To qualify for this you will need to have strong credit and be able to prove that you have consistently high revenues.
Heavy-duty truck financing
Heavy-duty vehicles like trucks are often hard to finance. There aren’t a lot of lenders who specialise in this, but if you are in the trucking business and you are looking to build a fleet, the would be a good option to consider. Most lenders require your business to be at least two years old and to have strong credit and high revenue.
A personal loan can be used for a number of reasons including buying a car for your business. This is a great option if you want to buy a car mostly for your personal use than for business. Personal loans have higher interest rates than a lot of the business car loan options out there so, treat it as a last resort.
You could refinance your mortgage to finance the purchase of your car. This is ideal for homeowners who are ahead with their mortgage payments. If your home holds enough equity, you can set up a secondary loan against it. Just make sure you stick to the purpose of the loan and not mess with your home mortgage.
Business Car Loan Providers
There are a number of lenders in Australia that offer business loans to finance cars. The three best providers that you can try are:
Stratton Finance has been providing car loans for a range of vehicles to meet different needs for over 25 years. It is one of Australia’s largest car finance brokers because of its partnership with Carsales network. You can get loan amounts of up to $100,000 at the fixed interest rate of 5.29% This offers you the certainty of knowing what you’ll be paying every month. The loan term is 1-7 years. You can trade the car back and use it as a deposit on a new car.
Bank Australia offers competitive rates on car loan. You can get finance on a fixed interest rate of 6.45 % per annum on a 7-year loan. There are no limits as loans are evaluated on an individual basis. You can make extra payments to pay your loan off quicker with no additional costs. You can finance that business vehicle you need or begin building the fleet you need for your business.
BusinessLoans.com.au is the easiest way you can access a business loan to finance your car. You can apply online for loans ranging from $5,000 to $250,000 payable over a 2 to 5-year term. You can choose to take balloon payments and you can aso repay your loan early. There are a number of options that you can choose from to meet you particular need like a specialised truck and trailer loan.
The bottom line is that there are many options that are available to businesses looking for car loans. It is important to evaluate your situation and be realistic about what you can afford. You may get the best deal or have to make concessions to get that much needed vehicle or fleet for your business. There are a couple of financial institutions that can help you access the finance you need. Do your homework properly and you will find the option that will work for you.