Best Business Car Loans
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In our business car loans guide:
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What is a business car loan?
A business car loan provides a business owner with funds to purchase a vehicle, including company cars, utes, vans and trucks. The vehicle being purchased is used to secure the loan, which is repaid in instalments over a fixed period.
There are a few different types of business car loans and ways they can be structured depending on the type of business and what the vehicle is used for.
As a business owner, you're an expert on what your business does, but you may not know a lot about business vehicle finance.
That’s where I can help.
Over the years, I’ve worked with dozens of business lenders and countless business owners seeking car finance.
Here’s my guide to business car finance and finding the best deal for your business.
How do business car loans work?
Business car loans work in a similar way to standard car loans taken out by individuals. they're sometimes called ABN car loans.
BUT there are some key differences. Here’s an overview:
- Finance a vehicle if it’s used for business purposes 51% of the time
- Typically borrow from $5,000 up to $1,000,000 (the max varies by lender)
- Loan is secured against the car being financed (secured business car loans are sometimes referred to as a chattel mortgage)
- Lower, fixed interest rates (because the loan is secured)
- Fixed repayment schedule
- Available with a term from 1 to 7 years
- Can be with or without a balloon payment option
- Popular with tradies and small businesses
What vehicles can I finance with a business car loan?
| Small vehicles | Large vehicles |
|---|---|
|
|
Business car loan tax advantages
A business car loan can offer significant tax benefits for eligible businesses.
You may be able to:
- Claim the GST back on the car
- Claim the depreciation back on your BAS
- Claim interest costs as a tax deduction
How do I get the best business car loan interest rate?
The interest rate on your business car loan will be determined by a few factors.
These can relate to you, your business and the vehicle you’re buying:
Age of the vehicle
Brand-new vehicles usually attract the lowest business car loan interest rates as they have a higher resale value. This makes them a less risky proposition for lenders.
Vehicles over eight years old will attract the highest rates. But even used vehicles should be eligible to be used as collateral (security) on a business car loan. Generally the cut off is 12 or 15 years old for a secured loan.
Size of vehicle
Business car finance for large vehicles (like trucks) will often attract higher interest rates than smaller vehicles.
For example, some lenders charge higher rates on loans for vehicles above 4.5 tonnes.
Credit score
Lenders may review the personal credit scores of each Director as well as the company credit score when assessing an application for a business car loans.
Higher credit scores generally mean a lower interest rate.
Do you own a property?
Lenders generally view borrowers who own their own home as being less risky, compared to renters.
Less risk usually means a lower rate on a business car loan.
The table below shows how the interest rate you’re charged can impact the monthly repayments on your business car loan.
It can certainly pay to find the lowest car finance rate you can.
Best business car loan rate comparison
| Business car loan amount | 6% interest | 8% interest | 10% interest |
|---|---|---|---|
$10,000 | $193.33 | $202.76 | $212.47 |
$20,000 | $386.66 | $405.53 | $424.94 |
$30,000 | $579.98 | $608.29 | $637.41 |
$40,000 | $773.31 | $811.06 | $849.88 |
$50,000 | $966.64 | $1,013.82 | $1,062.35 |
$60,000 | $1,159.97 | $1,216.58 | $1,274.82 |
$70,000 | $1,353.30 | $1,419.35 | $1,487.29 |
$80,000 | $1,546.62 | $1,622.11 | $1,699.76 |
$90,000 | $1,739.95 | $1,824.88 | $1,912.23 |
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What fees are charged on business car loans?
It’s not just the interest rate that determines whether you’re getting the best business car finance deal.
Fees can make a BIG difference too and turn what looks like the cheapest loan into a major expense for your business.
Here are the most common ones to watch out for.
- Establishment fee
- Documentation fee
- Monthly account keeping fee
- Extra repayment fee
- Early payout fee
How to compare business car loans to get the cheapest deal
We’ve touched on some of the key factors already.
But here’s an overview of the main points to look at when comparing car finance options for your business.
- Interest rate: Interest may be tax deductible in some cases, but getting a low rate is still preferable.
- Fees: Watch out for high fees. The loan’s
comparison ratewill show how fees add to the overall cost of the loan. - Loan term: Does the duration of the loan match the needs of your business and its future planning?
- Repayment flexibility: Look for loans that allow you to set your repayment frequency (weekly, fortnightly, monthly) to align with your cash flow situation.
- Early payout: Having the ability to pay off your business car loan early without penalty will mean saving on interest.
Who is eligible for a business car loan?
Generally you’ll need to meet these criteria:
- Own a business and have an ABN
- Business must be GST-registered
- Be an Australian citizen or permanent resident
- Minimum business-operating time of six months
- Can provide business bank statements and other financial/tax records to demonstrate revenue is sufficient to repay loan
How to apply for a business car loan
Applying for business car finance is usually quick and easy.
In most cases it can be done online.
You’ll need to give the lender documentation that shows your ability to comfortably repay the loan.
Your business bank statements will be enough to illustrate your monthly business revenue in some cases. In others, you’ll need to provide more documents.
There are two types of applications for business car finance in Australia: streamlined application and standard finance application.
Streamlined business car loan application
You may qualify for the streamlined application, if you:
- Are applying for vehicle finance up to $150,000; and
- Have been in business for at least 12 months; and
- Have an ABN and are GST-registered; and
- Have a clean credit history; and
- Own your home; or
- You’re renting but can provide a 20% deposit
Standard business car loan application
You’ll need to follow this process if you:
- Are looking to borrow more than $150,000;
- Have been in business less than 12 months.
You’ll need to provide additional documents such as profit and loss statements and your business balance sheet.
How to choose the best business car finance option
A business car loan is just one of the vehicle finance options available to Australian businesses.
There are several other forms of business finance that could be suitable, including:
Each option its own terms and pros and cons.
Some types of finance are more suitable for a single vehicle.
Others are tailored to businesses who need an entire fleet of company cars.
You can use the table below to quickly compare popular business finance options.
There are also finance options available for more specialised equipment if what your business needs is not eligible for a car loan.
Businesses can also help employees finance for their own vehicles through a tax-friendly novated lease.
Compare types of business car finance
| Finance type | Term | Pros | Cons |
|---|---|---|---|
Business car loan | 1-7 years | Business tax benefits and low interest rates compared to other options | Vehicle is recorded on your balance sheet |
Unsecured business loan | 1-7 years | More flexibility over the type and age of vehicle you can purchase | Usually higher interest rates |
Operating Lease | 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 | 1-7 years | Option to own vehicle at the end of the term | You're responsible for disposal of the vehicle at the end of the term |
Novated lease | 1-5 years | Offers significant tax savings | You must be an employee of a company to qualify |
Shopping around for the right loan can save you thousands of dollars in interest and fees.
Business Loan guides and resources
Learn more about your business finance options and how to get the funding you need to grow your business.
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Business car loans frequently asked questions
Get help from a real-life Money Matchmaker® from start to finish.
Can I get a business car loan if I’m self-employed (sole trader)?
If you’re self-employed you can apply for business car finance if you intend to use the vehicle for business purposes at least 51% of the time.
Just bear in mind that some lenders will only give you a business car loan if you’ve held an ABN for a minimum of one or two years.
You’ll also need to provide documents to show your income is sufficient to cover the loan repayments.
If you can’t prove your income, you can also consider a low doc business loan.
How long does it take to get approved for a business car loan?
You can be approved for a business car loan on the same day in some cases.
But it's more likely you'll receive an approval within a few days.
What is the average interest rate for a business car loan?
Your interest rate will depend on the age of the vehicle you want to buy, but can be as low as 5.84% and as high as 16.00%.
Can I get a business car loan if I have bad credit?
Yes, you can get a business car loan in Australia even if you have a bad credit score.
If you are an ex-bankrupt or don't qualify for a standard loan due to defaults or a low credit score, you can apply for a bad credit business loan.
Can you claim car repayments on tax?
Yes this may be possible. But generally only the interest charged by the lender is tax deductible.
The ATO says you can claim interest on a motor vehicle loan, lease payments, fuel and oil, repairs and servicing, insurance cover premiums, registration and depreciation.
If you use the vehicle for private as well as business use, only the business portion of the expenses will be tax deductible.
Get advice from a tax accountant if you need help working out how your business car loan could impact your tax situation.
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
