Choosing the right finance package for company cars
- Written by Stratton Finance
Whether it’s your first commercial vehicle or a few new additions to your current fleet, buying and financing your new company cars can be a confusing and sometimes frustrating experience. Should you lease and have your running costs covered or is the tried and trusted hire purchase method still considered the best option? Is the business car loan really better than buying outright?
Your choices when buying a company vehicle are many, but we have to say that financing is often the best route to take. Choosing to buy outright is a considerable investment and can be a limiting factor in other aspects of your business. Financing, on the other hand, gives you a manageable monthly payment and a less significant outlay to get your commercial wheels on the road.
And when it comes to financing those wheels, you will no doubt be on the lookout for a business car loan, and the four options below are exactly what you should have in mind.
Chattel Mortgage
The chattel mortgage is a great product that allows the business to take ownership of the vehicle right from the off. The financier gives you funds to buy your car or van and then takes a mortgage out on the vehicle as security over your loan. While you won’t hold the title of the car until the final payment is done and dusted, you are considered the owner of the car much like you are the owner of a mortgaged house.
The most attractive benefit of the chattel mortgage is the fact that it’s a great way to save on tax. If you’re registered for GST, you can claim the GST from the purchase price as an input credit. This means that your company gets a cheaper car.
Commercial Hire Purchase
Hire purchase has been one of the most common methods of commercial vehicle financing in years gone by, and it’s easy to see why. It’s a relatively simple agreement between you and the financier whereby they buy the vehicle and then hire it to you for the term of your agreement.
At the end of the contract, you can then opt to make a balloon payment and take ownership of the car, or you can simply start a new HP agreement with a new vehicle. You can also make tax deductions with this type of financing product once you use the vehicle for business most of the time.
Finance Lease
The finance lease or car lease is similar to Hire Purchase in that the financier purchases the vehicle and then leases it to you. You get the benefits of ownership and the opportunity to upgrade the vehicle once every two or three years.
The lease also offers some great savings as the running costs of the car are the responsibility of the financier. No servicing fees or surprise maintenance costs which we’re sure you’ll agree is an amazing benefit. The GST of the purchase price of the car is claimed back by the financier so your repayments should also be lower. Less tax always sounds good, right?
Novated Lease
The novated lease is another option available to business owners, but it’s slightly different in that it’s a salary sacrifice product. This means that your employee must agree to use part of their pre-tax earnings to pay for the car’s running costs. This is a good option if you have employees that want to own the company vehicle themselves.
Interestingly, the novated lease is not a purely commercial product. This type of lease is available to any employee who has an employer who is willing to help them out with salary sacrificing. The downside here (as we just mentioned) is that the company doesn’t own the vehicle.
If you’re in the market for a new company car, then one of the options above should be perfect for your needs. Why not customise the identity of your fleet with unique number plates from plate sales. However, it’s important to note that some may offer more savings than others depending on your company’s circumstances. For this reason, we always suggest that you speak to your bank or a finance broker before you make any decisions or sign on any dotted lines.
As Australia's largest car finance broker, Stratton Finance know a thing or two about loans and finance. With over two decades of experience in the field they are one of the most trusted authorities in the industry.
