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Business Car Loan Types - All you need to know!

January 22, 2018

 

When looking to purchase new or used business vehicles or equipment, the financing options can seem endless and confusing.

 

Tropic Car Loans offer's tailored finance solutions for business purposes across a range of specialist Car & Equipment Finance lenders.

 

We provide Chattel Mortgage, Hire Purchase, Lease and other commercial finance for business customers.

 

Outlined below are the main types of business finance and their benefits to you as the borrower.

 
CHATTEL MORTGAGE
 

Also known as an Equipment, Goods or Commercial Loan / Mortgage

Overview:

  • ​Suits Business Use

  • Loan terms generally 1 - 5 years

  • Ownership of the item is with the borrower

  • Lender takes security of item until the loan is paid off

  • Secured basis

Under a Chattel Mortgage the financier loans funds to the borrower for the purchase of a vehicle or business item. The borrower then takes ownership of the item at the time of purchase. The financier takes an interest over the item as security for the loan and once the loan is paid off the lender no longer has an interest in the item.

 

Benefits Include:

  • ​Loan terms generally 12 to 60 months

  • A balloon or residual value can be used to keep repayments within budget

  • Monthly repayments are fixed

  • Deposit (either cash or trade-in) may be used, often no deposit is required

  • A Chattel Mortgage is suitable for business entities & sole traders when the item to be purchased is for business use.

  • ​GST, depreciation & interest on the loan can be claimed if the item is used for business purposes. Check with your accountant to determine if the product is right for you and its tax deductibility.

 
HIRE PURCHASE
 

Overview:

  • ​Suits business use

  • Loan terms generally 1 - 5 years

  • Lender takes ownership of vehicle or item and then the borrower hires it back over a set term

  • Secured basis

A Hire Purchase is a commercial finance product where the borrower hires the vehicle or business item from the financier for a fixed monthly repayment over a set period of time.

 

​Under a Hire Purchase arrangement the financier agrees to purchase the vehicle or item on behalf of the borrower, and then hire’s it back to them over a set period of time. The borrower has the use of the vehicle or item for the term of the contract but is not the owner. At the end of the contract term the borrower takes ownership.

 

Benefits Include:

  • ​Contract terms generally 12 to 60 months

  • Residual value (balloon or final instalment) may be placed on contract

  • Monthly repayments are fixed

  • Deposit (either cash or trade-in) may be used, often no deposit is required

  • ​A Hire Purchase is suitable for business entities & sole traders when the item to be purchased is for business use.

  • ​GST, depreciation & interest on the loan can be claimed if the item is used for business purposes. Check with your accountant to determine if the product is right for you and its tax deductibility.

 
LEASE
 

Overview:

  • ​Suits personal (work) or business use

  • Loan terms generally 1 - 5 years

  • Lender purchases item and borrower leases it back over a set term

​A Car Lease or Finance Lease is a commercial finance product which enables the borrower to have the use of a car or commercial vehicle and the benefits of ownership, while the financier retains actual ownership of the vehicle.

 

​The financier purchases the vehicle or item behalf of the borrower, who then leases it back from the financier and pays a fixed monthly lease rental for the term of the lease.

At the end of the lease the borrower can either pay a final instalment on the lease and take ownership, trade or sell the item or re-finance the residual and continue the lease.

 

​Benefits include:

  • Flexible contract terms ranging from 12 to 60 months

  • Fixed monthly lease rentals

  • A residual can be applied to a lease, lowering monthly payments

  • Ability to make advance lease payments for tax deduction or cash-flow purposes

  • ​It is also ideal for employees who want to salary package a vehicle through a Novated Lease as part of their remuneration.

  • ​A Lease is suitable for business entities & sole traders when the item is for business use.

  • GST is included in each lease payment and claimed (if you are registered for GST and using the item for business purposes) across the whole lease term, rather than upfront like in a Chattel Mortgage or Hire Purchase arrangement.

  • ​Lease payments only can be claimed as a tax deduction if the item is used for business purposes. Check with your accountant to determine if the product is right for you and its tax deductibility.

 

LOW & NO DOC BUSINESS CAR FINANCE

 

All major lenders now offer the above listed motor vehicle and equipment loans without the need to provide your financials and or tax returns.

 

These loans are financed at competitive rates with no disadvantage for you not having your income details available.

 

There are some restrictions in place from lenders to take note of:

  • Some lenders require ABN registration for a minimum of 12 months while others require a minimum of 24 months.

  • GST registration is generally required for the same minimum period as ABN registration.

  • Items being purchased need to be new or only a few years old.

  • Lenders prefer applicants to be asset backed if they are not presenting financials. This is generally from property ownership. It’s okay if you have a mortgage on the property.

  • If home ownership is not demonstrated a deposit is generally required.

  • Credit history needs to be satisfactory with no adverse listings.

  • Approval is always subject to lender policy being satisfied.

 

LIAISING WITH YOUR ACCOUNTANT

 

If you are in the market for a new or used car or piece of equipment for business purposes it is best to consult with your Accountant as part of the process. This will help to determine what type of finance is best for your business structure and GST reporting type.

 

We can contact your accountant for you if you require. We do this regularly for our clients to make sure the finance we are arranging is correct for their situation. We will also send any relevant loan documents and purchase invoices to your accountant post loan settlement for your file.

 

If you have any questions, queries or need help with your finance, please do not hesitate to contact us.

 

​Regards, Simon Smyth

 

Mobile - 0427 216 011

Email - simon@tropiccarloans.com.au

Website: www.tropiccarloans.com.au

Credit Rep Number 437411

 

 

 

 

 

 

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