What is a Business Car Loan?
A business car loan is a type of business finance used to purchase or lease a vehicle. In Australia, most types of business car finance will be secured by the vehicle, and will range between one and five years. There are several types of business finance available, which we’ll cover in this guide.
In this Business Car Loans guide, you’ll learn:
- Who offers business car finance in Australia
- The types of businesses that use vehicle finance
- The vehicles you can purchase for your business
- The different types of business car finance available
- How to apply and what you’ll need to apply
- How to get the best interest rates on business car finance
Who offers business car finance?
You can apply for business car finance through your bank and non-bank lenders. You can also apply for a business car loan with specialist finance companies or directly through a dealership using car dealer finance. If you apply through your bank, you’ll generally be offered a lower interest rate, however the process will take much longer than through other lenders.
To get the fastest approval and best interest rates on a business car loan application, you may wish to consider working with a finance broker, who will handle the entire process on your behalf in return for a small fee.
Who can get a business car loan?
You can apply for business car finance if you intend to use the vehicle for business purposes at least 51% of the time. In Australia, company car finance is used by businesses of all types, and across all industries, to finance everything from a single vehicle to an entire fleet of company vehicles.
Most common small businesses using vehicle finance in Australia
|Small Businesses A - E||Small Businesses F - L||Small Businesses M - Z|
What vehicles can be purchased through your business?
With a business car loan, you can purchase almost any type of vehicle for your business. The type of vehicle you purchase, as well as its age, will dictate the amount of interest you pay on your loan. For example, brand-new vehicles will attract the lowest interest rates, while vehicles over eight years old will attract the highest.
If you are purchasing a second-hand vehicle, you may not be able to use it as security on the loan. Below are the most common types of vehicles purchased by businesses in Australia using business car finance.
Common vehicles purchased with business car finance
|Small Vehicles||Large Vehicles|
Large vehicles will often attract higher interest rates than small vehicles. You can see below how the weight of your chosen company vehicle may affect the interest rate applied to your loan or lease. This is especially important for small businesses or tradies looking to purchase delivery trucks or transport vehicles of a certain size.
How the type of vehicle will affect business car loan interest rates
|Asset||New or Used||Loan Term||Loan Amount||Interest Rates|
|Under 4.5 tonne||New||3 years||$30,000||4.79%|
|Over 4.5 tonne||New||3 years||$30,000||5.50%|
Important: This is an example and actual rates may differ.
Now let’s look at how the age of your vehicle may affect your interest rate. You can see that brand-new vehicles have the lowest interest rates and fees, as these vehicles present the lowest amount of risk to a lender - these cars have a lower chance of mechanical failure and a higher resale value.
How the age of your vehicle will affect business car loan interest rates
|Vehicle Age||Interest Rate||Fees|
|1 - 2 years old||5.50%||$0|
|3 - 5 years old||6.50%||$500|
|5 - 8 years old||7.00%||$750|
|8+ years old||8.50%||$1,500|
Important: This is an example and actual rates and fees may differ.
You’ll get the best interest rates on business car loans if you finance the newest vehicle you can comfortably afford.
What are the different types of business car loan?
There are several types of business car finance in Australia, each with their own terms and pros and cons. Some types of finance are more suitable for a single vehicle, while others are tailored to accommodate businesses requiring an entire fleet of company cars.
You can use the table below to quickly see which type of business car loan may be most suitable for you, and learn more about each type of finance on their dedicated pages.
Compare types of Business Car Finance
|Chattel Mortgage||Business||1 - 7 years||Business Tax Benefits||Vehicle is recorded on your balance sheet|
|Line of Credit||Business||up to 5 years||Flexible access to funds when needed||Large amounts only offered to high-earning businesses|
|Hire Purchase||Business||1 - 7 years||Your business will own the car at the end of the term||May require an upfront deposit|
|Operating Lease||Business||1 - 7 years||Lease is a tax-deductible business expense||Your business does not own the vehicle at the end of the term|
|Finance Lease||Business||1 - 7 years||Option to own vehicle at the end of the term||Responsible at the end of term for disposal|
|Novated Lease||Consumer||1 - 7 years||Incentive for your employees without managing an entire company fleet||Fringe benefits tax|
|Small Business Loan||Business||1 month – 5 years||Fast Access to Money||Can be expensive|
If you want to quickly see which type of business vehicle finance may offer the best tax benefits for your business, you can read our chattel mortgage vs lease vs commercial hire purchase guide.
How do I apply and what do I need?
Applying for car finance is usually quick and easy, and in most cases can be done online. With any type of business finance application, you’ll need to present a lender with sufficient documentation that illustrates your ability to comfortably repay the loan amount. Most times, just your business bank statements will be sufficient to illustrate your monthly business revenue.
There are two types of applications for business car finance in Australia: streamlined applications and standard finance applications. If you’re applying for vehicle finance to the value of $150,000, you can qualify for the streamlined application if you:
- Have been in business 12 months; and
- Have an ABN; and
- Are registered for GST; and
- Have a clean credit history
- Are currently renting and can provide a 20% deposit; or
- Own a home.
If you’re looking for funding greater than $150,000, or have been in business less than 12 months, you’ll need to apply through the standard finance application process.
If this is the case, you’ll need to provide additional documentation to the lender so they can better assess your application. Here are some tips to improve your chances of getting approved.
- Demonstrate an ability to service your business car loan or lease.
- Meet the lender’s criteria, such as:
- An ABN and GST registration
- An acceptable credit rating
- A minimum level of turnover
- A maximum level of other debt.
- Supply all your supporting documents, such as:
- Proof of identity
- Financial records (provided by your accountant)
- Profit and Loss Statements
- Balance Sheet
- Details of the asset you wish to purchase
- Business bank statements.
- Rates notice (if you own a home).
- Rental agreement (if you are renting).
You can finance a fleet of business vehicles and still qualify for the streamlined application process, provided the total value of the vehicles you wish to finance is less than $150,000.
Can I apply for a business car loan without any documentation?
Low-Doc business car finance and No-Doc business car finance are vehicle finance options if you are self-employed, or own a small business and can’t supply the required documents to support your application.
Low-Doc (Low Documentation) and No-Doc (No Documentation) loans will often come with higher interest rates and fees, and may not provide the flexibility of standard car finance.
How much can I borrow with a business car loan?
In Australia, the minimum amount for a business car loan is currently $5,000. The maximum amount you can borrow to purchase a vehicle for your business will depend on the type of business car finance you apply for.
If you want to see how much interest you'll pay on different loan amounts and calculate your regular repayments, you can use our free car loan calculator.
Business Car Finance Maximum and Minimum Borrowing Amounts
|Minimum Amount||Maximum Amount|
What is the term or length of a business car loan?
In Australia, the minimum term for a business car loan is one month by applying for a small business loan. However, most business car loans will range from one year to seven years.
Business Car Finance Term Comparison
|Chattel Mortgage||1 - 7 years|
|Line of Credit||up to 5 years|
|Hire Purchase||1 - 7 years|
|Operating Lease||1 - 7 years|
|Finance Lease||1 - 7 years|
|Novated Lease||1 - 7 years|
|Small Business Loan||1 month – 5 years|
What fees will I pay on a business car loan?
Just as the age of a vehicle will affect the interest rate applied to your loan, the older the car you wish to finance, the higher the fees will often be. You may also pay various establishment or ongoing repayment fees depending on the lender you wish to apply with. A finance broker can help you find vehicle finance options with no monthly repayment fees, though this may limit your available options.
- Establishment Fee
- Origination Fee
- Monthly Account Keeping Fee
- Early Termination Fee
- Early Payout Fee
Important: These are examples of the types of fees that may be applicable..
Business Car Loans Summary
Business car loans are used to purchase or lease a vehicle, and are generally secured by the vehicle with a term between one and five years.
In summary, Business Car Loans in Australia:
- Allow a business to finance a vehicle if it is used for business purposes 51% of the time.
- Are available from several different lenders
- Are generally secured by the vehicle
- Are highly popular with tradies and small businesses
- Will have interest rates affected by the age and type of the vehicle
- Are available from one month to seven years
- Can offer significant tax benefits for a business
Business Car Loan Pros and Cons
Business Car Loans FAQ
How can I buy a car through my business?
If you're planning to use the vehicle for more than business purposes at least 51% of the time, the most common type of finance is called a Chattel Mortgage. You can apply for a chattel mortgage online and often be approved within the same day.
How long does it take to get approved for a business car loan?
You can be approved on the same day, however it's more likely you'll receive an approval within a few days.
What is the average interest rate for a business car loan?
The interest rate will depend on the age of the vehicle you are wishing to buy, but can be as low as 5.00% and as high as 16.00%.