The backbone of a successful business can be many things, and one of these is a reliable car or a fleet of vehicles. This is especially true if your operations include delivery, a mobile service, or sales representatives. Investing in a company car can significantly enhance productivity and revenue. The purchase cost, however, can be prohibitive.
Fortunately, commercial vehicle finance is a popular loan option available to you. It’s designed primarily to help your business acquire the vehicles you need for your operations with suitable terms and conditions. Financing is often offered with flexible terms and potential tax benefits. Before you start the application processes, there are things you need to understand to avoid pitfalls.
1. What are your business needs?
Your business needs a vehicle but:
- How often will you use it?
- What are its business purposes?
- What type of vehicle do you need for your specific operations?
- Do you need a brand-new vehicle, or would a used one suffice?
Your answers to all these questions will help clearly outline your company’s specific requirements. This will help you choose a vehicle that meets your needs without overspending.
2. Do you qualify for a business car loan?
If you set up a finance checklist for your business, lenders also have eligibility requirements that you should meet. Compared to personal loans, business loans have stricter eligibility criteria. These include an active Australian Business Number (ABN), proof that a vehicle will be used primarily for business purposes, and documents that show your business’ financial stability over a certain period. You may need to provide income statements, cash flow projections, and tax returns. Prepare all the documents before you start the application process.
3. What’s your credit history?
A good credit history increases your chances of securing a favourable loan. With business loans, however, both your personal credit score and the company’s credit score may be evaluated. If both are in good standing, you may get financing with better terms and lower interest rates. Otherwise, take steps to improve your credit score before you apply for a business car loan.
4. What are the loan and lender terms?
Different lenders offer different loan terms and conditions. It’s important that you shop around and compare interest rates, additional fees, repayment terms, and other factors that can impact your finances. Interest rates can either be fixed or variable, while the terms can be shorter or longer, which can impact monthly repayments. Some lenders may also impose balloon payments or lump sums that you can pay at the end of the long term. Paying for this can help reduce the monthly costs, but careful planning is required. Think of a lender as an entity that can support your business growth. It’s important to choose the right loan provider.
5. What are the tax implications?
Business car loans come with potential tax benefits, such as GST credits or tax-deductible interests. You may also get credits as the vehicles depreciate. Consult with a tax advisor or accountant to maximise benefits and ensure your company is compliant with Australian tax laws.
These are just some of the questions to consider before you apply for a vehicle loan. To avoid straining your finances, assess your financial needs, understand the terms, and thoroughly research lenders before you lodge your application. Consult Metro Finance for vehicle financing that supports your business goals. Get a company car or fleet with the best terms.
