Business Vehicle Finance

What is business vehicle finance?

Business vehicle finance is a broad term for loans and leases used to purchase or lease a vehicle for business purposes. A business vehicle loan may be used by sole traders, partnerships and companies buying cars, utes, vans and other light commercial vehicles. Some people also use the phrase commercial vehicle finance when talking about work vehicles, although that term can also cover trucks and heavy machinery.

Depending on the structure, the vehicle and the repayments may be treated differently for tax purposes. The suitability of any structure depends on how the business is set up and how the vehicle will be used, which is why it is worth speaking with your accountant before choosing an option.

How to finance a car through your business

A common question is whether a car can be financed through a business rather than personally. In most cases it can, subject to lender criteria, and the main difference is who owns the vehicle during the loan and how the repayments are treated. These are some of the structures commonly used when financing a vehicle for business purposes.

Each structure has different ownership arrangements, tax treatments and documentation, so the right fit depends on the business structure, the vehicle and its intended use. Your accountant or a licensed adviser can confirm what may apply to your situation.

What lenders typically look at

Requirements vary between lenders, and newer businesses or applicants with limited trading history may be asked for additional documentation. Some lenders assess applications case by case rather than applying fixed criteria.

Business use vs personal use

Many vehicles are used for both business and private trips, and that mix matters. Lenders generally want to see that the vehicle is mainly for business use, and the percentage of business use can also affect how much of the vehicle's cost is deductible. Keeping clear records, such as a logbook of business kilometres, is a common way to support the business use percentage. How the business and private split is treated depends on the finance structure and individual circumstances, so it is a topic to raise with your accountant.

Financing work and commercial vehicles

Utes, vans and other work vehicles are among the most commonly financed business vehicles in Australia, particularly for trades and field services. Lenders may have policies around vehicle age, type and value, and some vehicles such as commercial fitouts can be treated differently from standard passenger cars. Terms and conditions vary between lenders, so it can be useful to understand the differences before applying.

New vs used for business

Business vehicle finance can usually be used for both new and used vehicles, though lenders may set age or kilometre limits on older vehicles. If you are weighing up a new vehicle for the business, our guide to new car finance covers how those loans generally work. If a used vehicle makes more sense, the guide to used car finance explains how vehicle age affects options.

Key things to look at

When looking at business vehicle finance options, people often consider the interest rate, comparison rate, fees, loan term, repayment frequency, and any balloon or residual amount. Some structures allow GST to be claimed upfront while others spread it across repayments, and deductible portions of the vehicle can depend on the mix of business and private use. Each lender sets its own criteria and pricing, so looking at more than one option is a common approach.