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Business Vehicle Financing: What Are Your Options?

Business Vehicle Financing: What Are Your Options

Owning a business may require you to have a vehicle to transport goods or meet with your clients. The company can quickly progress if you can meet the demands required by your operations. Because of this, it would be best to have a vehicle under your business name.

Of course, if you're a startup and not yet established, you would need a little assistance in this arena. You would require something to finance your business vehicle, as taking it directly from your profits earned early in the business can set you back further.

In Australia, if you have a registered business, you can quickly get ABN vehicle finance. ABN or Australia Business Number is a unique 11-digit number that recognizes your enterprise within the government and the community.

Having an ABN has many benefits, including being easily identified within the country as a legitimate operating organization. What's great with it is you can claim energy grant credits if you're using sustainable energy means, have an Australian domain name, and claim tax credits on business expenses like a vehicle.

If you already have an ABN, here are some vehicle financing options you can access:

1. Car Loans 

Many organizations, like brokerages, facilitate car loans to eligible business owners. They can be the intermediaries between business owners and financial institutions for a more straightforward process. What's excellent about car loans today is that they can finance vehicles of up to AUD$1 million.

Car loans for ABN require no deposit, have better competitive rates, and will not affect your credit score. Additionally, they often have high approval rates, require little documentation, and have no restrictions on the type of vehicle or its age.

Your enterprise may need trucks, vans, trailers, or ute. The brokerage will assist you in acquiring the best deals for the vehicle you need. The requirements are straightforward; you only need to be over 18 years old, have a valid driver's license, be a citizen of the country and have a valid ABN.

Take advantage of extended tax benefits if you have an ABN and get your car loan from reputable brokerages.

2. Commercial Hire Purchase 

Over a set period, a customer can hire a vehicle from a lender for a fixed monthly repayment scheme. Initially, the customer can use the vehicle however they want but have no ownership. At the end of the contract term, when the interest charges are paid in full and the total price of the vehicle minus any residual is accounted for, the vehicle's ownership transfers to the customer.

3. Dealership Loan 

Car dealers can offer finance options for customers who want to acquire a vehicle for their enterprise. What's excellent with dealership loans is sometimes they offer a 0% interest rate. This often means the purchase price will go higher.

Another great thing about dealership loans' flexibility is their offer of a balloon payment toward the end of the mortgage period. This will allow you an easier-to-pay scheme at the onset. However, as you get a more significant bottom line, you can save money for the balloon payment later.

new vehicles business

One setback for a dealership loan is that if you have a low credit score, the chances for your application to be declined are higher. Typically, the vehicles eligible for dealership loans are only brand-new ones. These could be pretty impractical for a startup.

4. Operating Lease 

If you're looking for an easy and cost-effective way to finance a company vehicle, you may opt for an operating lease. With an operating lease, the brokerage will own the car. Then, you only need to pay monthly rentals.

Imagine you don't need to make an initial down payment. It's like a long-term rental, usually for one to five years. This will likely not create a dent in your operating costs. However, with an operating lease, you will not have ownership of the vehicle after the lease period. This is something you might want to consider when shopping for business vehicles.

5. Novated Car Loan 

If you're rightfully employed, your company can offer a company loan through what is popularly known as ‘salary sacrificing.’ A novated car loan works by having your employer take out a lease with a financial company. They will then be responsible for making monthly mortgage payments on your behalf. The agreement will dictate that payments be made before your salary is deposited into your account.

You might want to look at the list of preferred fleet organizations your employer goes for. Because if the vehicle you wish to acquire is not on their list, you may have minimal choices. Before planning for this, make sure to talk to your employer first to determine their policy. Moreover, you have to check if your take-home pay after all the deductions will be sufficient to sustain your daily needs. After all, it might not be wise to rely on your business profits to support your expenses. You will not be able to accurately see if your business is earning money properly.

Conclusion 

Starting a business can be an exciting endeavor. and knowing that all the hours you have spent studying its feasibility will come to fruition is a prospect worth noting. However, you need to be diligent and discerning when crunching numbers. It is crucial to check for viable options for financing your company assets like your business vehicle. You may choose a car loan, a dealership loan, or even a salary sacrifice option. What's essential is that you put enough time into weighing the pros and cons to end up on the winning side of the scale.

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