Key Takeaway Table
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What is a business car loan?
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A business car loan is a loan made to purchase a car, van, or any vehicle used purely for business purposes. Business car loans are usually chattel mortgages, which means the vehicle itself serves as security for the loan. Although less common, there are also unsecured car loans available.
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Benefits of getting a car for your business
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A business auto loan can help you preserve cash to pay for more essential business expenses, like working capital, improvements, expansion, and emergencies. Car loans can also give you access to better vehicles and improve your overall business image and productivity.
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Steps to secure a business car loan
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Start by assessing your business needs. What is the car's purpose? Determine the type and model of the car you need and how soon you need it. Compare lenders based on rates, terms, fees, and approval criteria. After choosing a lender, gather all requirements, and submit your application.
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Businesses purchase cars and other vehicles for different reasons. Some businesses naturally require cars, while some greatly benefit from the purchase of one. Whatever the purpose, a business car loan is a great way to get the vehicle your business needs.
What is a Business Car Loan?
A business car loan is a loan you apply for when you need a car, van, or any transport vehicle for your business. The vehicle must be used for business purposes, like travelling to meet clients, buy inventory, meet suppliers, deliver goods, and other business purpose needs.
A car loan is most commonly a chattel mortgage, which means the asset is considered the security for the loan. If the borrower fails to repay the loan, the lender can rely on the vehicle to minimise any loss. Since the asset is the security, you can typically get lower interest rates, favourable terms, and fast approval.
A less common option would be an unsecured auto loan. Some lenders, typically non-bank loans, offer car loans without requiring the vehicle to serve as security. Instead, they may ask for guarantees from the business and its owner. However, with unsecured loans, you are more likely to get higher interest rates and shorter terms.
Benefits of Getting a Car Loan for Your Business
Here are some ways a car loan can be advantageous to your business:
- Better Financial Management: A car loan gives you access to a car or any transport vehicle without paying out a large sum using your business's available funds. With a car loan, you can preserve cash to attend to other essential aspects of your business, like working capital.
- Access to Better Vehicles: With car loans, your business can operate with up-to-date and reliable transportation without causing a significant strain on your business's finances.
- Asset Ownership: Once you complete payments on your loan, the vehicle becomes the property of your company. This can contribute to your business assets and potentially increase your balance sheet position over time.
- Enhanced Business Image: Having a dedicated business vehicle can enhance your professional image - creating a positive impression to clients, suppliers and a benefit to employees.
- Increased Productivity: Business vehicles can increase productivity by providing efficient transport for employees, goods, or services. This can improve customer service and overall efficiency and punctuality.
Steps to Secure a Business Car Loan
- Assess Business Needs: First, think about your business needs. What do you need a car or any transport vehicle for? Once you have narrowed down the purpose, you can determine what type of vehicle you need. Do you need a sedan, or will a larger van serve your business better? Ideally, before you apply, you’ll already have selected the specific vehicle you want.
- Review Eligibility: Next, review your credit history and credit score. Lenders usually base eligibility on creditworthiness, time in business, a directors asset position and other policy, although some lenders will have lower credit standard than others. You should also check if your business has the capability to make repayments. Again, not all lenders have high approval criteria, so take note of your eligibility before choosing a lender.
- Research and Compare Lenders: It's important to go over different lenders to find one that can give you the most favourable terms, rates, fees, and process your application in line with a timeframe that works for your needs. Check with both banks and non-bank lenders. Banks and other traditional lending institutions will have higher criteria and requirements but will have the lowest rates and longest terms. Meanwhile, non-bank lenders may approve loans despite bad credit and tax debt, but they will have higher interest rates and shorter loan terms.
- Gather Requirements: Gather the requirements needed for the loan. Requirements will differ greatly depending on the lender. Traditional lending institutions are more likely to ask for full documents. Meanwhile, non-traditional or online lenders can approve your loan with fewer or no documents required.
- Submit Your Application: Once everything is prepared, submit your application and wait for a response. Some lenders may grant approval faster than others, so take note of how urgent your needs are before choosing a lender.
Get a Car Loan for Your Business
A dedicated company car can help you improve your business’s image and boost efficiency. Darkhorsefinancial.com.au can help you explore your loan options. We can help you get low or no doc loans with low approval criteria. Talk to a loan expert today to learn more.
