Business Car Loans & Financing

What is a business car loan?

A loan for a business vehicle is typically a secured loan, where the asset (in this case the vehicle), is used as collateral. This means that if you default on the loan, the lender can repossess the vehicle to recoup their losses. That said, one benefit of a secured business car loans is that these types of loan products are quite common and can attract a lower interest rate because the loan is secured. Additionally, a business loan for a car can even have some potential tax benefits, depending on the financing option you select.

What are the different types of commercial vehicle loans available?

• Chattel mortgage: This is a type of secured loan where the asset you’re purchasing (in this case a vehicle) is used as collateral for the loan. Additionally, with a chattel mortgage you’re typically considered the owner of the vehicle even as you pay it off, allowing you to potentially claim depreciation or other tax deductions. That said, it’s always best to speak to a qualified tax advisor for advice before making a decision.
• Hire-purchase agreement: Hire-purchase agreements provide a bit more flexibility, allowing you to use the vehicle as you pay it off, although you won’t technically own it, the lender will. You’re also generally able to return the asset during the ‘hire’ period if you no longer need or require it. Once the final loan payment is made, ownership of the vehicle is transferred to you.
• Lease agreement: Similar to hire-purchase agreements, with a lease agreement you don’t technically own the asset, but rather you lease it from the lender, similar to renting a property. Another difference is that unlike hire-purchase agreements, at the end of the lease period you won’t own the asset. Instead, you’ll have the option to extend the lease, purchase the asset at a reduced rate, or simply end the agreement and return the asset.

What kinds of business vehicles can I purchase through financing?

Common vehicle types that are purchased using business financing include:

• Utes and vans
• Trucks (including finance for trailers, too)
• Other; sedans, wagons, four-wheel drives

What factors can affect your interest rate?

Lenders can have different criteria for how they determine car loan interest rates. Some of these factors can include:

• Whether the vehicle is new or used
• The type and age of the vehicle
• The term of the loan agreement
• The particular loan product you select (eg: chattel mortgage, hire-purchase agreement)

Can a business car or vehicle loan come with tax benefits?

This can depend on your financing option. For example, with a chattel mortage, because you technically ‘own’ the vehicle even as you’re paying off, you may be able to claim tax deductions on that asset. However, with a hire-purchase agreement, or even a lease agreement, because you don’t technically own the asset, your tax implications could be different. In any case, it’s always best to talk to a qualified tax advisor to get a clearer view of any tax implications.

What are some factors to consider when comparing loans for my business vehicle?

• Ownership: Do you want to own the vehicle outright? If so, then a loan type such as a chattel mortgage could be a more suitable option.
• Interest rate: Interest rates can vary between lenders, and this can make a big difference on your monthly repayments as well as the overall cost of your loan.
• Loan term: While secured loans typically have longer terms, there’s still a lot of difference in available loan terms.
• Fixed or variable: While fixed interest rates provide valuable certainty, you won’t benefit in reduced repayments should interest rates fall. You’ll need to decide whether you’d prefer the security of a fixed loan or the flexibility of a variable loan.
• Fees and charges: Fees and charges, both for the initial set-up and ongoing maintenance of your loan, can vary between lenders.
• Schedule of repayments: How much will your repayments be? Can you change the repayment schedule to suit your cash flow?

What factors could affect your eligibility?

When it comes to preparing your application, the team at Valiant can answer any of your questions, and guide you in preparing the necessary documentation. That said, here are some additional factors which can affect your loan eligibility:

• Your credit rating
• Your trading history and how long your business has been in operation
• Whether or not you’ve defaulted on a loan or experienced a bankruptcy in the past
• The percentage of business vs personal use of the asset or vehicle
• Whether or not you’re eligible to work in Australia

Compare finance options for your business vehicle with iSelect and Valiant*

iSelect have partnered with Valiant to make it easier for businesses to find a car or vehicle loan that suits them. They’ll help you compare products on offer from their range of lenders, and handle the process of applying and settling for you. Click here to get started online today!

Last updated: 09/04/2021

The information in this content is general in nature and should not be considered tax advice. You should always seek professional tax advice or assistance before acting or relying on any content.