Are you considering applying for a business vehicle loan? Whether you’re looking for a fleet of new cars, versatile utes, or heavy-duty trucks that can go the distance, commercial vehicle finance equips your business with the vehicles it needs without tying up your much-needed cash.
But how does financing a car work for businesses, and what should you consider before taking the next step? Here’s everything you need to know to make an informed decision about commercial vehicle financing.
Experience the perks of a new vehicle without damaging your cash flow – contact Fast Funding 4U to discuss business vehicle finance rates with our expert brokers.
What is Vehicle Finance for Business?
Business vehicle financing is a specific type of business loan that allows you to purchase vehicles for commercial use. Competitive interest rates and flexible payment options make financing an attractive option for business owners.
As with any loan, you can obtain a business car loan or truck finance through a financial institution or lender to whom you will make regular monthly payments over a fixed term.
However, unlike personal car finance, you can only apply for a commercial vehicle loan if you own a business, are self-employed, or require the vehicle for business purposes.
Things to Consider Before Applying for a Business Vehicle Loan
Before committing to commercial vehicle financing, there are several factors to consider. Here’s everything we think you should know before applying for business vehicle finance.
Eligibility Requirements
Eligibility requirements for business car finance in Australia can vary between lenders and business types. For example, car finance for sole traders may only stipulate your eligibility to work in Australia and apply for business credit, whereas business applications often require more information. Typically, when applying for a car loan for business use, you will be asked to confirm:
Eligibility requirements for business car finance in Australia can vary slightly by lender and the type of loan. The good news is that the eligibility fundamentals are pretty consistent, whether you’re applying for a car loan for business use or flexible car finance for sole traders. Typically, you will be asked to confirm:
- You are a business owner, are self-employed, or represent a company.
- The vehicle will predominantly be for business use.
- Your Australian Business Number (ABN) registered in the last 2 years.
- Business financial statements from the last 2 years, usually including a balance sheet and profit and loss statement.
- Tax return statements from the previous 2 years.
If you’re unsure whether you meet these eligibility requirements, contact Fast Funding 4U to speak with one of our experienced finance brokers. Don’t worry if you can’t provide all the documentation – you may still be approved for finance, though having complete documentation is useful and can help lock in better interest rates.
Your Credit Profile
Credit activity plays a vital role in your likelihood of approval for car loans for business. Plus, a higher credit score often helps you secure lower interest rates. When considering your application, lenders will examine your business credit score, trading history, financial statements, existing debt obligations, and repayment history. To increase your chances of approval, make sure to pay off any debts or loans on time to maintain a good credit history.
That’s not to say you can’t take out an automotive business loan if you have a bad credit history; however, poor credit often decreases your chances of loan approval. Our team at Fast Funding 4U can help you obtain a credit report before applying for a small business vehicle loan so you can address any issues that might affect your application.
New vs. Used Business Vehicles
The age and condition of your chosen vehicle will undoubtedly impact your commercial car loan. Newer vehicles tend to qualify for better rates, lowering the cost of monthly repayments.
On the other hand, used vehicles often cost less initially but typically come with limited or no warranty, which can cause issues down the line with repairs and maintenance costs. It’s also worth noting that many lenders won’t supply vehicle business finance for models that are over 20 years old. If you’re considering an older vehicle, you can benefit from Fast Funding 4U’s add-on warranties to give you peace of mind that your car is protected.
Commercial Car Loan Options
Business car loans in Australia come in several forms, each with distinct advantages. Ensure you understand the types of car loans and vehicle financing options available before deciding on the best choice for your business:
- Chattel mortgage: the most common type of business vehicle finance, a chattel mortgage allows you to own the vehicle immediately while the lender holds security over it.
- Hire purchase: this loan allows you to lease a vehicle for a fixed period. After the loan term ends, ownership of the vehicle transfers to your business.
- Finance Lease: a commercial vehicle finance lease involves the lender owning the vehicle and leasing it to your business for a fixed term. Once the period ends, you can either purchase or return the vehicle.
Understand the Total Cost
When budgeting for commercial car finance, consider the total cost, not just the interest rates. Are there early repayment penalties? Is a balloon payment required? Are there any end-of-lease costs? Gaining clarity on the cost of business vehicle finance before application means there will be no surprise fees, protecting your capital and cash flow.
Loan Term
The term of the loan is the length of time you agree to make payments for your vehicle. Depending on the amount you borrow, commercial car loan terms generally range from one to five years, with some lenders offering a maximum of seven years for repayment. Remember that the longer the loan term, the more interest you will pay, so it is essential that you consider the implications of your term agreement in full.
Impact on Your Cash Flow
While entering a new business vehicle finance agreement can ease financial strain at the outset, you must consider if you have the cash to support the decision. No one wants to see dramatic fluctuations in cash flow, so although financing can help spread the costs into reliable, fixed outgoings, make sure adding an additional payment won’t strain your cash flow to breaking point. Consider your growth projections over the repayment term and any contingency plans for quieter months to ensure you won’t default on payments.
Tax Implications
A positive to remember is that business vehicle financing can have potential tax benefits for your business. You may be able to claim depreciation and deductions for interest charges or even a credit for the goods and services tax (GST) paid during your loan term. When considering business vehicle loans, make sure you clearly understand the after-tax implications to ensure they align with your business goals and budget.
Fast Funding 4U Business Car Finance Australia
Speak to one of our expert financial brokers to see how a commercial vehicle loan could benefit your business. With over 30 years of industry experience, our friendly team is on hand to help you find the best finance solution to meet your business goals and needs.
Getting a new vehicle for your business couldn’t be easier. Call us on 1800 44 22 89 today or click the button below to begin the loan application process.
Drive your business towards success.