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Commercial loans
for your business vehicle

4 things to consider when choosing a commercial car loan

A commercial car loan can help you put new vehicles to work sooner, without putting your cash flow under pressure. Depending on your situation, it could even help you pay less tax. Here are five key things to consider when choosing your loan.

1. Your finance options

Two of the most common vehicle finance options for business are a Chattel Mortgage and a Finance Lease. Both help you put new vehicles to use today, then gradually pay them off over time from the cash flow they help to generate. Yet there are also some important differences.

Chattel Mortgage

With a Chattel Mortgage, you borrow the money to buy a vehicle upfront, with the vehicle itself acting as security for the loan. You also have the flexibility to structure the loan to match your cash flow and the way your business operates – paying a larger deposit now, or a larger amount at the end of the loan, for example. Your loan may offer a choice of flexible terms (up to five years), helping you tailor your repayments to suit your business situation.

Finance Lease

With a Finance Lease, the lender buys the vehicle then leases it to you for a set term. During the lease period, you pay the running costs. At the end of the term, you have the option of buying the vehicle for its residual (remaining) value. That gives you both choice and certainty, with the potential to claim a tax deduction for lease payments along the way.

Guaranteed Future Value

There’s also a third option: Guaranteed Future Value. This is a flexible finance solution that provides you with the assurance of knowing exactly what the minimum value of your vehicle will be at the end of your loan. This can help you decide to either keep the vehicle, trade it in or return it for a payment when your finance period ends.

2. Whether to choose a balloon payment

A Chattel Mortgage often gives you the option of making a balloon payment – a larger, extra payment you make at the end of the loan term. 

Like a house deposit, a balloon payment can help lower your regular payments during the life of your loan – but unlike a deposit, you don’t have to pay it until the end. That can help you better match your outgoings to your business cash flow, or even help fund your final payment from a vehicle resale.

3. What’s included in your quote

Once you’ve decided on your finance options, the next step is to get a quote. The Business Manager at your local dealership can help. But make sure you understand exactly what your quote covers.

The different options you choose can make a big difference to both your upfront expenditure and your borrowing costs over time. It’s important to ensure the quote includes the type of finance agreement involved (a Chattel Mortgage, for example), whether there’s a balloon payment, and what’s being financed, including any on-road costs.

It’s also important to check the details of interest rates, fees and loan terms, especially when comparing finance options. For example, a loan with a longer term may appear to have lower repayments now, but it could also mean paying more over the life of the loan.

4. The tax implications

Depending on your situation, commercial vehicle finance can offer significant tax benefits, helping reduce the cost of funding the vehicles your business depends on. 

With a Chattel Mortgage, you may be able to claim a tax deduction for interest and depreciation. You may even be able to take advantage of the government’s instant asset write-off, potentially enabling you to claim an immediate deduction for the cost of the car in the first year.

With a Finance Lease you may be able to claim a tax deduction for lease payments and any residual payments, as well as claiming back GST.

Find your new business vehicle

Ready to start shopping? Then talk to the Business Manager at your local dealership, or visit a dealer from one of our partner brands. They can walk you through the options and help you find the right solution for your business.