Yes, whether you are a sole trader, a small business, or a major corporation, you can access business car finance. After assessing your cash flow and operational history, a lender can provide the funds required for financing a car purchase.

Financing a Business Vehicle: Before You Begin

Before you get started with purchasing a vehicle through your business, you need to make sure that you meet the criteria for the purchase. Remember, you are not just using your business to buy a vehicle for you. Instead, you are using your business to buy a business vehicle – a crucial distinction.

Assessing Your Business’s Vehicle Needs

If you need a light commercial van to make deliveries, a specialised vehicle to move equipment from site to site, or a larger people carrier to support your teams in the field, you are going to be able to finance this purchase through your business.

Remember that you will have to demonstrate why your business needs this vehicle as part of its setup. Analyse your operations and assess where your business genuinely requires a vehicle. This type of purchase may be eligible for instant asset write-off.

Split Usage Vehicles

If you are a business owner or manager, you’re likely to be doing a lot of travelling. It doesn’t necessarily make sense for you to operate a specific vehicle for this travel, so you may find yourself carrying out both business and personal travel in your own vehicle.

You can still finance a vehicle purchase through your business. However, you may need to show that the majority of your travel will be business-related. Businesses can claim GST credits on the vehicle, so you’ll need to be able to demonstrate how the car is being used. There may also be a fringe benefit tax – FBT – applied to the vehicle if you are also using it for personal travel. Please note that FBT may still be applied even if you do not use your vehicle outside of work, as the availability of the car for personal travel may still be considered a fringe benefit.

Business Vehicle Purchase Methods

Now that you’ve established that you can finance the purchase of a motor vehicle through your business, it’s time to consider your finance options. There are a number of different avenues you can choose for making this purchase.

Outright Purchase

If your business has sufficient funds, you may be able to purchase the vehicle outright. This will avoid interest rate payments and other fees associated with taking out a loan, and you will have more freedom when it comes to selling the vehicle. Just bear in mind that this is a significant capital investment.

Taking Out a Commercial Vehicle Loan

You can take out a loan specifically to buy a car or commercial vehicle. In most cases, this loan can be achieved via an online application after you have proved your business’s eligibility. From here, you will either pay off the loan amount in full over a series of repayments or use the repayments to bring the loan principal down ahead of a final balance payment in full.

Taking Out a Chattel Mortgage with the Vehicle as Security

With a chattel mortgage, you are using the car as security against the loan. This means you lose a degree of freedom when buying a vehicle, as you will not be allowed to sell the vehicle before the end of the loan term. If you are certain you will be getting good use out of the vehicle for the duration of the term, and will not need to sell, this can be a good option.

Buying a Vehicle Through Commercial Hire

In the case of a commercial hire purchase, the lender essentially purchases the car for you. Your business can then use the vehicle, but you must pay the instalments of the loan over a set period of time. When the loan has been paid off in full, your business will retain ownership of the vehicle and the title will be transferred to you.Fixed Period Finance Leasing

A finance lease is similar to a commercial hire purchase. The lender buys the vehicle at its purchase price and then leases it back to you. You get to use the vehicle for the duration of the agreement, after which you may decide to complete the purchase of the car with a lump sum or refinance the lease.

Novated Lease

With a novated lease, your employees purchase a vehicle against their pre-tax income. Repayments are made from the employees’ post-tax salary, essentially representing a tax deduction for employees.

Learn More About Your Business Car Finance Options: Here at Sydney Brokers, we can help you with financing a business vehicle. Reach out to our team, schedule a consultation, and let’s get started.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.