Business Car Loans | Financing Australia

To be eligible for commercial financing products, the applicant must have a current ABN and produce identification as mandatory requirements. Applicants will also be requested to provide documents relating to the financial position of the enterprise. These documents may include annual accounts, BAS returns, profit and loss statements, tax returns, assets and liabilities schedules and similar.

No. Being registered for GST is not a mandatory requirement for eligibility for commercial financing products. However, some lenders may view those that are registered more favourably. All enterprises with a turnover over $75,000 pa must be registered for GST.

A Chattel Mortgage is a secured form of commercial financing which is widely used for funding vehicle purchases. The Chattel is the vehicle and the mortgage refers to the funds. This is  a versatile product which suits many operations that use the cash accounting method. It suits the purchase of many different types of vehicles. Some lenders may refer to this product as Secured Vehicle Finance as a more contemporary term. The vehicle is accepted as the security for the funding and the buyer takes immediate ownership of the vehicle while repaying the funding.

There are three main types of funding products for the purchase of motor vehicles – Chattel Mortgage, Leasing and Hire Purchase. The selection of which is best is based on which is most appropriate or best suited to the individual requirements of the enterprise. The deciding factors may include the approach to taxation, approach to the balance, accounting method utilised and general financial objectives. All products include tax benefits.

The tax deductible elements of vehicle funding products vary. The repayments on vehicle leases are treated as an expense for the enterprise and are tax deductible. The total amount of repayments made in a financial year would be entered as deductions when the tax return is prepared. With Chattel Mortgage and Hire Purchase, only the interest portion of the monthly payment is tax deductible. These products realise a tax deduction through depreciation of the vehicle as an asset. The depreciation value is calculated in line with ATO schedules.

The balloon payment is a portion of the total funding amount requested which is payable at the conclusion of the funding term. It is due as a lump sum after the final monthly repayment is made. The balloon can be expressed as a percentage of the total funding amount or as a dollar figure. The balloon percentage remains constant through the term and attracts interest. When due, the balloon may be refinanced with a new funding arrangement. Balloon relates to Chattel Mortgage and Hire Purchase. The residual is a similar term which applies to Leasing but differing arrangements to finalise the residual apply.

All types of vehicles may be eligible for commercial funding products. These include SUVs, utes, cab chassis, light commercial vans, passenger cars, sedans and other body types and models. To meet tax deductibility criteria, the vehicle must be used for and in carrying out a commercial enterprise. Buyers may seek ATO guidance or advice from an accountant around the eligibility of vehicles for commercial purposes. Where vehicles purchased by and owned by enterprises are also used for private purposes, FBT may be applicable.

Where the owner of an enterprise seeks to provide a vehicle for an employee, they have a number of options. Where the vehicle is to be used primarily to carry out the role, the owner may choose to purchase the vehicles with Chattel Mortgage, Leasing or Hire Purchase. The business:private use may be subject to FBT and should be discussed with an accountant. Another option is a Novated Car Lease with Salary Sacrificing. This is a three-way arrangement between employer, employee and lender. The vehicle is purchased by the company under a leasing arrangement and the employee sacrifices as portion of their salary to cover the costs as paid by the employer. The end purpose is for the employee to own the vehicle at the end of the leasing term.

Yes. As long as an enterprise has an ABN and identification they may be eligible to apply for commercial vehicle funding. Where a new enterprise does not have all the documentation that is requested on the application form, they may consider applying for Low Docs or No Docs arrangements. These are descriptions of applicants that do not have all the documents required for the standard commercial funding application.

If you have an ABN and identification you can apply for commercial funding for the vehicle. A commercial van should be considered as suitable vehicle for finance. As a new operator, if you do not have all the financial records including tax and BAS returns, you may seek lenders that offer Low Docs and No Docs options. These are specifically designed for operators without all the supporting documentation for their application.

The same funding products may be available for both new and used vehicles. The products being Chattel Mortgage, Leasing and Hire Purchase. The age and condition of used models will be taken into consideration by lenders. The decision will determine if the vehicle is accepted as suitable security for a Chattel Mortgage and/or eligibility for Leasing. If not considered suitable security, a used vehicle may be financed with an unsecured credit product. Where accepted for secured forms of funding, used vehicles may attract a different interest rate and varying conditions on the funding arrangement compared with new vehicles.

Whether or not the monthly repayments change over the term will depend on the type of interest rate secured on the funding. The types being fixed interest rate or variable interest rate. Most lenders will tend to offer a fixed interest rate on Chattel Mortgage, Hire Purchase and Leasing. The fixed rate and a fixed term will result in repayments which are also fixed for the term. Where a variable interest rate is applied to funding, the repayments may be subject to variations over the term.

The terms available for funding vehicles for use in an enterprise can vary with the lender and the details of the individual application. Terms of up to 7 years are available. The lender will take into account the specifics of the vehicle including price, market value and type as well as the total funding amount requested and the credit profile of the applicant. An offer will be prepared which includes the approved term as well as the interest rate.

Yes. An application for vehicle funding can be submitted and processed through to approved status prior to the actual purchase of a vehicle. The total amount required may be estimated for this purpose and finalised when the purchase is finalised. Pre-approved funding would attract the same interest rates as when the application is submitted post-purchase or when a purchase commitment has been made. Many operators utilise pre-approved funding to provide a clear indication of how much they will be approved to borrow. This may provide assistance in selecting a vehicle which is priced to suit the funding and budget.