Regardless of whether you’ve been maintaining a business for a very long time or in the beginning phases of a start-up, or functioning as an individual trader, it’s almost certain you’ll require a vehicle for business use, individual use, or both. This article will focus on three basic options to finance a business vehicle.
- Chattel mortgage
- Commercial hire purchase
- Novated rent.
Each of these has its benefits and drawbacks and it varies from person to person depending upon the financial condition of an individual. You must consult the financial advisor or a business accountant to ensure that which of these three options will give you more benefits before applying.
In addition to this, if you are looking forward to purchasing a used car then you can run an online car history report. This will make your job easy and convenient.
Chattel mortgage
A chattel mortgage is a type of secured car loan for business. In this category, you borrow all or a specific part of the car’s total value from the banks or the lender and pay the finance amount over a specific period. This period consists of around 2 to 7 years. The finance amount includes an interest rate that has to be paid with the initial amount.
The vehicle belongs to you as long as you are paying the loan. Failed to pay the finance amount will allow the lender to take the car back in their possession.
Summary of advantages
- the vehicle is a business resource
- Includes competitive rates
- GST and Tax deductions, which will be beneficial for the individual.
- It includes fixed interest rates.
Commercial hire purchase
A commercial hire purchase (or CHP) is almost the same as a chattel mortgage. The difference is that in this finance deal the vehicle will not be owned by the individual until the end of the agreement. You can still claim for the benefits of ownership but the vehicle will not be counted as an asset for the individual unless the agreement is ended.
Summary of advantages
- The car will be counted as an individual asset at the end of the agreement.
- GST isn’t charged on the month to month rental or remaining instalment
- It also incorporates the tax deductions when the car is utilized for business purposes.
Novated lease
A novated lease is a kind of vehicle fund which permits the employees of a certain company to lease a vehicle using pretax income. The lease amount is deducted from the employee salary and this process continues over a specific time. This is an attractive deal for the employees of the finance company, but it cannot be offered to every employer. You must assure their long term commitment to the business before going for a novated lease.
Summary of advantages
- GST will not be included in the purchase price.
- The leasing company will incorporate all running costs of the vehicle in your regular payments.
- It will lower the marginal tax rate.
There are various types of car loans that are offered by different financial institutions. The three financing options discussed in the article are the most common car financing options available for the consumers.
Car financing deals can be utilized according to the income of an individual. The feasibility of the loan lies in the income you earn. You can choose any type of car loan that suits your income and enjoy the benefits offered to you by the financial institution.
You must consult the financial advisor or the lender before taking any kind of loan. They will guide you on which type of financing option suits you according to your income. Hence, after this confirmation, you can take any type of car loan you want to have.
