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How do business car loans work?
A business car loan allows business owners and directors to borrow money (as a lump sum) to purchase a business vehicle. This means you'll use a car at least 50% of the time for business purposes, including company cars, utes, vans, and trucks.
It works similarly to standard car loans taken out by individuals but is designed specifically for business owners. You repay the loan in instalments with interest over a fixed term. Remember, the longer your loan term, the more interest you’ll pay.
The vehicle you buy is used to secure the loan, meaning the lender can repossess the asset if you default. A secured business car loan is a type of chattel mortgage.
Here’s quick snapshot of what you can get with a business car loan:
- Borrow anywhere from $10,000 to $1,000,000+
- Lower, fixed interest rates from 7.50% p.a. (for prime business borrowers)
- Loan terms from 1-7 years
- Finance for new or used vehicles
- Homeowners can get lower interest rates
- Can be with or without a balloon payment option
- Claim GST credits & other tax deductions
- The vehicle is financed under your business ABN which means the business owns it
There are different eligibility and application requirements for business owners applying for a commercial car loan, which may require the expertise of brokers or specialised lenders.
‘Vehicles or transport’ is by far the most common reason businesses request a loan through Money.com.au (41.50% of all requests). The average requested amount for a business car loan is $58,706.
What are the best business car loan interest rates?
Business car loan interest rates generally start from 7.50% p.a. Established businesses with a steady revenue stream and a good credit rating will generally qualify for the best rates.
Startups and businesses without a proven trading history may qualify for rates closer to 15% p.a. Consider enlisting the help of a finance broker to ‘shop the rates’ between bank and non-bank lenders.
Business car loan rates & monthly repayment examples
| Business car loan amount | Monthly repayments with 7.5% p.a. interest rate | Monthly repayments with 9.5% p.a. interest rate | Monthly repayments with 11.5% p.a. interest rate |
|---|---|---|---|
$10,000 | $200.38 | $210.02 | $219.93 |
$20,000 | $400.76 | $420.04 | $439.85 |
$30,000 | $601.14 | $630.06 | $659.78 |
$40,000 | $801.52 | $840.07 | $879.70 |
$50,000 | $1,001.90 | $1,050.09 | $1,099.63 |
$60,000 | $1,202.28 | $1,260.11 | $1,319.56 |
$70,000 | $1,402.66 | $1,470.13 | $1,539.48 |
$80,000 | $1,603.04 | $1,680.15 | $1,759.41 |
$90,000 | $1,803.42 | $1,890.17 | $1,979.33 |
$100,000 | $2,003.79 | $2,100.19 | $2,199.26 |
Factors that impact your business car loan interest rate
1. The age of the vehicle you’re buying
New and demo vehicles generally attract lower business car loan rates. That’s because newer vehicles usually have a higher resale value, which is less risky from a lender’s perspective. Used and specialised vehicles with limited resale demand (e.g. ice cream trucks) will attract the highest rates. Based on analysis by Money.com.au, most lenders have a cut-off of 12-15 years old for a secured small business car loan.
Here’s an example of base rates from our broker network for new and used car business loans.
2. Your business revenue
Businesses with a proven trading history and a steady income (or healthy balance sheet) will generally qualify for a lower interest rate. Startups and businesses trading for less than two years may still qualify for a business car loan, but generally at a higher interest rate.
3. Your credit score
Lenders may review your personal credit score and that of your company directors when assessing your application for a business car loan. They will generally look for missed payments, defaults and insolvencies (e.g. bankruptcies).
Based on our analysis of various business lending criteria, lenders generally look for a minimum director credit score of 500-600 and a minimum company credit score of 475-500. Generally, a higher credit means a lower interest rate.
4. Your assets & liabilities
When determining your business car loan interest rate, lenders consider your business income and expenses, assets (such as business equipment or personal vehicles), and existing debts. As a general rule, the less debt/liabilities you have on your balance sheet, the more you can borrow.
5. Whether it’s a dealer or private sale
Some lenders prefer that you buy a business vehicle via a licensed dealer, as the purchase is usually backed by a statutory warranty. When buying a vehicle from a private seller, you might not receive a statutory warranty, although the manufacturer's warranty could still be valid, and there’s usually no cooling-off period. Some lenders may apply a rate load of 0.50-1% to private sale purchases.
6. Whether you’re a homeowner
Lenders generally view borrowers who own their own home (or any residential property) as less risky than renters. That’s because homeowners are ‘asset-backed borrowers’ who can potentially borrow against their home equity to secure another loan or settle an outstanding debt. Homeowners can also generally borrow more than non-property owners and over longer terms.
Who’s eligible for a business loan?
Generally, the minimum eligibility requirements for a small business loan in Australia include:
- Australian citizenship or permanent residency
- An active ABN or ACN
- Your business must be GST-registered (depending on the lender)
- At least six to 12 months of trading history
- A minimum annual business turnover of $75,000 - $100,000
- The ability to provide financials or bank statements
- A good credit score — the minimum business credit score is 475; for company directors, it's about 500 (it could be less if you're a homeowner).
- Operate in a non-excluded industry (some lenders won’t lend to the likes of gambling-related businesses, debt collection companies and tattoo studios).
How to apply for a business car loan
1
Compare business car loan options
Consider getting multiple personalised quotes from lenders through a finance broker. This will allow you to compare business car loans interest rates, fees and features without impacting your credit report. Keep in mind that your individual rate usually ends up being different to the lender’s advertised rate.
2
Prepare your application information
Lenders will ask for financial documents to verify your business revenue and some information about your business’ structure, trading history and industry. Having this information ready will save you and the lender time. You can generally apply for a business car loan online through your lender’s application portal or via a broker who can submit your application on your behalf.
3
Submit your financial documents
Your lender will ask to review business financials, since you’ll be making repayments using business income. You may be asked to submit business bank statements from the last six to 12 months, as well as business registration and tax information (e.g. BAS statements, tax returns). You'll have to confirm your identity by uploading some identification documents (e.g. driver’s licence or passport).
4
Wait for your business car loan to be approved
Your lender will evaluate your ability to repay the loan based on your business financials and will conduct a credit check. You may be granted conditional approval until you find a vehicle to buy and sign a purchase agreement, although this is optional. The lender will verify if your chosen vehicle meets the finance eligibility criteria and approve your business loan application if everything checks out.
Financial documentation required for a business car loan application
| Minimum time in business | Financial documents required | Other requirements | |
|---|---|---|---|
Established business | More than 5 years | Two years of financials + 3 months of bank statements | Financials must be prepared by an accountant |
Business with low documentation | More than 2 years | Latest BAS statements + 3 months of bank statements | Must be a homeowner or have a 10% deposit |
New business/startup | Less than 2 years | 12 months of cash flow projections (prepared by an accountant) + 3 months of bank statements | Must be a homeowner or have a 10% deposit |
Sole trader | Up to 2 years | 2 payslips + 3 months of bank statements | Payslips must show ability to repay the loan |
Save time by finding the right business car loan option first time
Shaun McGowan, Loans Expert
“Time is money for businesses, so it’s worth checking which type of business car loan you’ll qualify for before you spend time applying (and potentially needing to reapply). More often than not, business owners who don’t own a home and who’ve been operating for less than 12 months will have limited options, compared to business owners who own a home and profitable business.”
Shaun McGowan, Loans Expert
Should I get a business car loan with a balloon payment?
Some business car loans may have the option to include a balloon payment. This is a lump-sum residual repayment you pay at the end of the loan term to clear your remaining loan balance. The balloon payment can range from 20-40% of your loan amount depending on what you agree with the lender.
Choosing a balloon payment option reduces your regular repayments, which can help free up cash flow for the business. But you’ll have a lump sum remaining at the end of the loan term. You’ll also pay more interest over the life of the loan if you include a balloon.
Business car loan with & without balloon payment
| Car loan with balloon payment | Car loan without balloon payment | |
|---|---|---|
Loan amount | $50,000 | $50,000 |
Loan term | 7 years | 7 years |
Interest rate | 8% | 8% |
Balloon payment | $10,000 (20% of loan amount) | $0 |
Monthly repayment | $690 | $779 |
Total interest payable | $17,970 | $15,462 |
Total to be repaid | $67,970 | $65,462 |
Cost difference | +2,508 |
Business car loan GST & tax benefits
The interest on your business car loan and other expenses related to owning and running a business vehicle, like depreciation, may be tax deductible as ‘business expenses’, according to the ATO. If your business is registered for GST, you may also be able to claim a credit for the GST included in the price of the vehicle (provided you have a tax invoice) in your Business Activity Statement (BAS).
The GST credit you can claim is capped at 1/11th of the car limit for depreciation set by the ATO each year.
- For 2023-24, the car limit for depreciation is $69,674.
- The maximum amount of GST you can claim during that year is 1/11th of that cost limit — $6,334.
You can only claim a GST credit on the portion of the vehicle's cost related to business use. For example, if you use your vehicle for business purposes 51% of the time, you can only claim a credit of 51% of the GST you paid. Speak to your accountant about which tax benefits may apply to your business.
Maximum GST credit amounts & car value limits over the last 5 years
| Financial year | Maximum GST credit | Car value limit |
|---|---|---|
2024-25 | $6,334 | $69,674 |
2023–24 | $6,191 | $68,108 |
2022–23 | $5,885 | $64,741 |
2021–22 | $5,521 | $60,733 |
2020–21 | $5,376 | $59,136 |
2019–20 | $5,234 | $57,581 |
What fees are charged on a business car loan?
Car loans for businesses also come with set fees that can quickly turn the cheapest loan into a major expense for your business. Here are the most common business car loan fees to watch out for.
- Establishment fee: $150 - $550
- Documentation fee: $150 - $495
- Monthly account keeping fee: $0 - $10
- Extra repayment fee: Depends on loan amount & loan term
- Early payout fee: $0 - $450.
Which lenders in Australia offer business car loans?
Business car loan providers
Here’s a list of some of the main business car loan providers in Australia:
- Alex Bank
- AMMF
- Angle Auto Finance
- ANZ
- Azora
- Banjo
- Branded Financial Services
- CarStart Finance
- Capital Finance
- Commonwealth Bank
- Drive Finance
- Finance One
- Firstmac
- Flexi Commercial
- Gedda Money
- Green Light Auto Finance
- Grenke
- Group & General Finance
- Grow Finance
- Iron Capital
- Latitude Financial
- Liberty
- Macquarie Capital
- Metro Finance
- MoneyPlace
- Moneytech
- NAB
- NOW Finance
- Pepper Money
- Plenti
- Rapid Loans
- Salt & Lime
- ScotPac
- Selfco Leasing
- Shift
- SocietyOne
- Thornmoney
- Vestone Capital
- Westpac
- Wisr
While this is an extensive list, not all business car loan providers in the market may be included.
Other business car finance options
Chattel mortgage
A chattel mortgage is another term to describe a business car loan. It works like a secured car loan where you borrow a lump sum of money that you repay with interest over a fixed term. A chattel mortgage can also finance the purchase of business equipment, including machinery, mining equipment, kitchen equipment for restaurants, etc.
Finance lease
This is when the lender buys the vehicle on your behalf and leases it back to you in exchange for regular payments over a fixed period. You’ll have the option to buy the asset and assume full ownership of the car, trade it in, or opt for lease refinancing. A finance lease is generally used for long-term high-value assets like company vehicles and heavy machinery.
Operating lease
With an operating lease, the lender will buy the vehicle on your behalf and rent it to you in exchange for regular payments over a fixed period of time. You can upgrade the asset or equipment during the lease term, but never get ownership of it.
Personal car loan
You may be able to get a personal car loan for vehicles you use for business-related activities less than 50% of the time, like if you're a real estate sales representative or tradie. This option may be popular with self-employed individuals and sole traders.
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