Business Car Finance – Companies, partnerships & sole traders looking for business car finance have a number of options.
The most appropriate type of finance for each business needs will depend on business structure, cash-flow requirements, GST registration status and tax considerations.
Car-Loans.net.au specialise in car finance for companies, partnerships, sole traders and other businesses – we have the right solution for your needs.
Business car finance options:
A Finance Lease (Car Lease) enables a leasee to have the use of a car or commercial vehicle without ownership – the financier retains actual ownership of the vehicle.
The financier purchases the vehicle on behalf of the customer, who then leases the vehicle back on a fixed monthly rental plan for the term of the lease.
At the end of the lease the customer can pay the residual value (final instalment) on the lease and take ownership of the car, trade it in and take a new lease or re-finance the residual and continue the lease.
Benefits of a Lease:
- Flexible contract terms ranging from 24 to 60 months (two to five years).
- Fixed interest rate.
- Fixed monthly lease rentals.
- Costs are known in advance.
- A residual can be applied to a lease, lowering monthly payments.
- Tax deductions are available when the vehicle is used for business purposes.
- As the GST contained in the car’s purchase price is claimed back by the financier, only the vehicle’s price exclusive of GST is financed, lowering monthly payments.
- Ability to make advance lease payments for tax deduction or cash-flow purposes.
- The lease is secured against the vehicle, allowing lower interest rates.
Car Leasing is also suitable for employees who want to salary package a vehicle through a Novated Lease as part of their remuneration.
Tax implications of a Car Lease
GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the customer is registered for GST, they can claim some or all of the GST contained in the lease rental and the residual value as an input credit on their next Business Activity Statement.
Where the amount financed is below the Depreciation Limit the customer claims the lease rental as a tax deduction. Above the Depreciation Limit, interest charges on the lease and depreciation up to the value of the Depreciation Limit can be claimed.
Commercial Hire Purchase
Commercial Hire Purchase is a commercial finance product where a business (or an individual using the asset predominately for business use) “hires” a car from the financier for a fixed monthly repayment over a term and has the option to purchase the car at the end of the term.
A Chattel Mortgage is a commercial finance product under which a financier loans money to a business to purchase a car or commercial vehicle (chattel), and then secures the loan with a mortgage over the vehicle.
While not strictly a business car finance option, Novated Leasing is a great way for businesses to offer an added incentive for their staff at no extra cost to the employer, by salary packaging employees’ vehicles.
Not sure which finance option is best for your business?
Not sure which business car finance option is best for your business? You should contact your Accountant and have a chat – he is the best person to guide you through.