Best Business Car Loans in Australia

The first thing to understand with car finance is that it’s not a single product type. You can finance a commercial vehicle either through a business car loan (known as a chattel mortgage) or through a lease.

With a loan you own the car from the start and pay it off over a fixed term, with the vehicle serving as security for the loan. With a lease you have unlimited access to the vehicle but your business does not own it, until you trigger ownership by making a final limp sum payment.

In this guide we’ll mainly focus on business car loans, but we’ll explain some of the ways a lease works differently later on.

Business car finance rates are dynamic, which means each borrower’s rate will be unique to them. Lenders determine rates on a case-by-case basis based on the risk involved with the finance applicant.

Your credit score, trading history, revenue, the age of the vehicle and the industry your business operates in are just some of the factors lenders may take into account when assessing our application and determining your rate.

Business car loans generally come with flexible repayment options, including your choice of term duration (1-7 years typically). You also get the option to make interest only repayments for a period, a repayment schedule to match your cashflow, and the ability to make extra repayments to pay down the loan faster (watch out for break fees).

We’ll discuss your preferences with you in our initial discussion and then tailor our search of business car finance providers to match your needs.

Many clients we help with finance for a business vehicle set up the loan with a balloon payment.

What this means is the loan will have a large final (balloon) payment at the end of the finance term. Setting the loan up this way means the initial repayments on the loan will be smaller than they would be without the balloon.

This can be a great option for businesses who want to keep as much cashflow free for other purposes. When the balloon payment is due, many businesses choose to refinance it over a new loan term, assuming the vehicle is still up to it. Alternatively, you could choose to sell the vehicle and use the sale funds to clear the balloon payment.

It’s very rare for a lender to require a deposit on a business car loan, meaning it’s usually possible to finance 100% of the vehicle’s purchase price. The exception is usually bad credit borrowers and businesses with a limited trading history who may need to contribute deposit to ensure approval on the loan.

If you finance the vehicle with an unsecured business loan, you may even be able to finance more than 100% of the vehicle cost and use the surplus funds for related costs. We generally recommend borrowers still use a secured loan to cover the vehicle purchase and, if needed, finance the related costs separately – for example, using a line of credit.

If you take out a business car loan, there are a number of tax advantages and deductions that may be available to you:

• GST credit on the purchase price of the vehicle (up to the relevant cap for the financial year in which the vehicle is purchased)
• You may be able to claim tax deductions on the loan interest, finance fees, vehicle operating costs and depreciations

Talk to your tax advisor to understand which deduction may apply to your business, but remember deductions or credits will only apply on the business use of the vehicle (personal use is not covered).