If you or your business is looking for a car loan that is to be used predominantly for business use then the best car loan option would be either a:
- Car Lease
- Commercial hire purchase (CHP)
- Operating Lease
- Chattel Mortgage
- Novated Leaseness Use
To find out more on each of these areas, please scroll down the page.
Car Leasing Benefits
- You don’t tie up your cash and can use this money to invest in the development of your company.
- You may not require a deposit for the car loan.
- You’re buying more of the car with every car loan payment
- You can make a tax-free profit when you sell your car (Novated Lease)
- You can pay the car loan with pre-tax dollars (salary packaging), which reduces your taxable income (Novated Lease)
- You can upgrade to a newer car at any time
- You can claim GST on the car loan.
- A simple monthly payment takes care of everything
- Depreciation and interest may be claimable on the car loan.
Applying for a Business car lease with Velocity Financial Services is easy. We do all the hard work for you – can assist with selection of the right product for your requirements, prepare all the paperwork and submit it to the appropriate lender. As a finance broker we are not limited to any particluar finance company – we can hunt around for the lowest interest rate, help you avoid ‘hidden’ fees and charges and most of all prepare the paperwork with the minimum of fuss and maximum of professionalism.
If you would like more information on any Business Car Lease, one of our Car Leasing consultants can prepare you a tailored car lease package.
Commercial Hire Purchase (CHP)
CHP is a car loan where the customer can obtain goods by hiring them over the repayment term with a transfer of title to the customer on payment of the last rental. In most states a CHP can be 100% finance or with an optional deposit. Repayments can structured and can be payable in advance or arrears. CHP differs to leasing as the customer gains equity in the asset over the term of the agreement. Balloon payments for this car loan option are structured to meet the cash flow and taxation position of the lessee/hirer. Balloon payments can be made anywhere in the repayment schedule. There are no limits on balloon payments anywhere in the rental stream for CHP.
In a basic CHP there are four variables to consider
- The amount to be financed for the car loan.
- The car loan Finance Term
- Interest for the car loan
- Balloon Payment for the car loan. E.g. 48 month term/ 40% balloon – 60 month term/ 30% balloon
Features of a CHP
Enables you to have use of the asset without tying up the company’s working capital. This means payments can be paid out of the additional profit generated by use of the goods, whilst keeping your cash flow healthy for additional expenses. You pay a fixed amount each month which helps you to budget effectively. It gives you ownership of the asset upon payment of the final installment / balloon. You can claim interest charges and depreciation, which allows you to offset the cost against your taxable profits thus reducing your tax bill.
Accounting Benefits
Interest charges in the Commercial Hire Purchase and depreciation of the vehicle are tax deductible. No capital outlay is required in a Commercial Hire Purchase and cash flow is protected. Terms can be flexible with the Commercial Hire Purchase, fixed repayments make for easy future budgeting. After full payment of the Commercial Hire Purchase agreement, ownership of the goods is transferred to you. You have the option to make payments with or without a balloon payment at the end of the term. The amount financed is inclusive of GST, however, your monthly repayments are not subject to GST. The goods you purchase become an asset that shows on your balance sheet for your business. The goods will also be a contingent liability until the end of the finance agreement.
Applying for a CHP with Velocity Financial Services is easy. We do all the hard work for you – can assist with selection of the right product for your requirements, prepare all the paperwork and submit it to the appropriate lender. As a finance broker we are not limited to any particular finance company – we can hunt around for the lowest interest rate, help you avoid ‘hidden’ fees and charges and most of all prepare the paperwork with the minimum of fuss and maximum of professionalism.
Operating Lease
An operating lease enables you to use motor vehicles and other assets without taking the risks associated with owning them or having to expend any capital to purchase the assets. Ownership of the asset is retained by the finance company and you are provided with full use of the vehicle in return for a fixed monthly rental matched to a term and distance that suits your needs. At the end of the lease term, the vehicle is simply returned in good condition and your finance obligation ends.
Benefits of a Operating Lease
- No capital outlay is required to fund the purchase of vehicle
- The fixed car lease rentals are on a single monthly invoice allowing easy and accurate budgeting
- The car is funded externally and not shown on the balance sheet
- There is a reduction in the time and expense of administration, especially when taken with full maintenance.
- Car lease rentals are usually fully tax deductible (except for luxury vehicles)
- There are no costs or liability associated with vehicle disposal
What are the minimum requirements?
Our minimum requirements are just 1 vehicle! So now all small to medium sized companies can have access to all of these operating leases.
Chattel Mortgage
Chattel mortgages allow some sole proprietors, partnerships and companies to claim back the GST in the vehicle’s purchase price in the first Business Activity Statement after purchase (BAS). We can advise you of the terms under which a Chattel Mortgage is applicable.
Features of Chattel mortgages are:
- The interest component of the loan repayments and vehicle depreciation may be claimed as business tax deductions.
- The GST refund in the vehicle’s purchase price may be paid off the loan, reducing interest charges and the amount financed.
- Payments are fixed enabling you to plan your cash-flow.
- Loan repayments can be direct debited from your bank account.
- The loan is secured by the vehicle.
- Loan terms range from 36 to 60 months.
Novated Lease
A Novated Lease is a three-way agreement between:
- Car Financier
- Employer
- Employee
An employer agrees to take on the finance for a car of your choice from the finance company for a fixed period of time. The employer then takes the repayments out of your “pre tax” salary, doing a “salary sacrifice”, thus reducing your taxable income. While the contract for the finance is between the employer and the finance company if you change jobs, you take your Novated Lease and your car with you.
At the end of the term of the Novated Lease you may have the option to purchase the car for a residual (balance owing), or you can sell or trade. If you find you make a profit from selling the car, then it’s your to keep!
Features of a Novated Lease
There are numerous benefits of a Novated Lease, including:
- The ability to cost-effectively package the car of your choice. This process is completely flexible and only limited by how much you are able to allocate from your salary.
- The car is yours to use 100% of the time, it’s not a company car
- Repayments can be fixed over a period of 1 – 5 years
- As all costs are paid in pre-tax dollars, a Novated Car Lease can be tax effective.
- As a car purchased under a Novated Lease often qualifies as a company car it may come under a company fleet discount
- The Novated Lease is portable and may be re-novated from one employer to another
- (depending on employer acceptance).
For more information, please get in touch.
