Business Car Finance

What is business car finance?

Business car finance is a loan or lease arrangement used to purchase a vehicle for business purposes. It is commonly used by sole traders, companies and partnerships buying cars, utes, vans and light commercial vehicles. Depending on the structure, the vehicle and the repayments may be treated differently for tax purposes, so it is worth speaking with your accountant before choosing an option.

Common finance structures

• Chattel mortgage: the business owns the vehicle from day one and the lender takes a mortgage over it. Often suited to businesses registered for GST.
• Hire purchase: the lender owns the vehicle while the business hires it, and ownership transfers once the final payment is made.
• Novated lease: an arrangement between an employee, an employer and a finance company, commonly used for vehicles partly used privately.
• Business car loan: a secured loan where the vehicle is used as security, which may mean a lower interest rate.
• Unsecured business loan: not tied to the vehicle, which offers flexibility but may come with higher rates.

What lenders typically look at

Things to keep in mind

The right structure depends on how the business is set up, how the vehicle will be used, and the tax treatment you are after. Some structures may allow GST to be claimed upfront, while others do not, and deductible portions of the vehicle can depend on the mix of business and private use. A balloon or residual amount lowers regular repayments but leaves a lump sum owing at the end of the term. Rates, fees and conditions vary between lenders, and the suitability of any option should be confirmed with your accountant or a licensed adviser before proceeding.