Key Takeaways
- Business car loans help companies purchase vehicles for operational use, offering various financing options like chattel mortgages, finance leases, operating leases, hire purchases, and rent-to-own solutions.
- New car loans in Australia can offer lower interest rates and tax depreciation benefits but come with higher initial costs and faster depreciation.
- Used car loans in Australia provide lower upfront costs and slower depreciation but may require higher maintenance and repairs over time.
- New cars tend to be more reliable, energy-efficient, and come with the latest technology, but they are more expensive.
- Used cars are more affordable and have slower depreciation, but they may lack modern features and warranties.
- When choosing between new or used business car loans, consider factors like cost, reliability, tax benefits, and how much maintenance the business is willing to handle.
- Reputable lenders for business car loans in Australia include major banks, specialist car loan providers, and non-bank lenders, each offering various loan terms and conditions.
- For loans up to $250,000, there are no income verification applicatoins to get a business car loan if your ABN has been registered for more than 24 months. For higher loan amounts, lenders may look at your bank statements or request full financials. Get a quote here.
- Seek help from a lending expert like Dark Horse Financial to secure the business car loan you need, whether you need a new or a used car.
Accessing reliable vehicles is important to a business’s success. You’ll need good vehicles to drive to client meetings, transport goods, or simply carry out operations. To get access to cars both new or used, you’ll need business car financing. What’s the best choice for your business: a new car or a used one? Are there loans to help you purchase either?
This article will discuss business car loans in Australia, specifically comparing new car loans with used car loans. Let’s look into the differences between the two options and how business car loans work to help you determine which option is best for your business.
What Are Business Car Loans Australia?
Business car loans are a type of financing product designed to help businesses purchase a vehicle for business purposes. They allow you to borrow money from a lender and repay it over a set period.
In Australia, businesses can apply for either a new car loan or a used car loan. Both options allow you to finance a vehicle, but there are differences in the terms, interest rates, and overall cost.
Types of Business Car Loans in Australia
- Chattel Mortgage: A chattel mortgage is a popular option for businesses when purchasing a vehicle. The business owns the car outright, but the lender holds a mortgage over the vehicle until the loan is paid off.
- Finance Lease: In a finance lease, the lender retains ownership of the vehicle. At the end of the term, the business has the option to purchase, return, or continue renting.
- Operating Lease: An operating lease is a rental agreement where the business does not own the vehicle but can use it for the term of the lease.
- Hire Purchase: A hire purchase arrangement allows the business to hire a vehicle with the option to purchase it at the end of the contract.
- Rent-to-Own: Rent a business car with the option to purchase it during or at the end of the term.
New Car Loans for Your Business
Purchasing a brand-new car for your business is an exciting prospect, but it comes with a different set of pros and cons compared to buying a used vehicle.
Benefits of New Car Loans for Your Business
- Depreciation Tax Benefits: One of the key reasons businesses opt for new car loans in Australia is the potential for depreciation benefits. Businesses can claim depreciation as a tax deduction over the life of the vehicle. This can significantly reduce the overall cost of the car.
- Lower Maintenance Costs: New cars generally have fewer issues and require less maintenance than used cars. For a business that relies on its vehicle for day-to-day operations, having a reliable car can prevent costly repairs and downtime.
- Better Fuel Efficiency and Technology: Modern vehicles often come with the latest fuel-efficient engines, advanced technology, and safety features. For businesses concerned about operating costs and safety, a new car can provide peace of mind and lower ongoing costs.
- Financing Options: New car loans typically offer lower interest rates than used car loans. Lenders often view new cars as a less risky investment, which translates into better finance deals.
Downsides of New Car Loans for Your Business
- Higher Initial Cost: The main downside to a new car loan is the higher upfront cost. New cars are more expensive than used ones, which means higher monthly repayments.
- Depreciation Hit: While depreciation can be beneficial for tax purposes, it’s worth noting that a new car loses value much more quickly than a used car. The moment you drive it off the lot, it starts to lose value.
Used Car Loans for Your Business in Australia
Used car loans are a popular option for businesses that want to save money on the initial cost of purchasing a vehicle. Here are the pros and cons of used car loans:
Benefits of Used Car Loans for Your Business
- Lower Purchase Price: The biggest advantage of car finance for second-hand vehicles is the lower purchase price. Used cars typically cost significantly less than new cars, meaning your business can save on upfront costs and reduce your loan amount.
- Slower Depreciation: A used car has already experienced the bulk of its depreciation. While it will still lose value over time, it will do so at a slower rate compared to a new car.
Downsides of Used Car Loans for Your Business
- Higher Maintenance and Repair Costs: Used cars can come with higher maintenance and repair costs, especially if they’re older models. While the purchase price may be lower, these additional expenses can add up over time.
- Limited Warranty: Many used cars don’t come with a warranty, which means that any major issues may need to be paid for out of pocket. This risk can be mitigated by purchasing from a reputable dealer.
New vs Used Business Car Finance: The Key Differences
Here are the key differences between new and used car loans for your business in Melbourne or anywhere in Australia:
- Cost: New cars are more expensive, both in terms of the purchase price and ongoing costs (insurance, depreciation). Used cars are more affordable upfront, but they may require more repairs and have less advanced features.
- Depreciation: A new car will lose value more quickly, but it offers tax advantages through depreciation claims. A used car will depreciate at a slower rate, but you won’t be able to claim as much in tax deductions.
- Warranty: New cars have full manufacturer’s warranty, while used cars will have limited or no warranty at all.
- Lender Policy: New car loans in Australia are preferred by banks due to less risk. Meanwhile,non-bank lenders usually have more flexible policies around the age of the car.
- Reliability: New cars are more reliable and require less maintenance, while used cars may come with a higher risk of mechanical issues. This can affect your business operations if the vehicle is out of service for repairs.
Should I Get a New or Used Car Loan for My Business?
Is it better to finance a new or used car? Deciding between a new car loan or a used car loan ultimately depends on your business’s needs, budget, and long-term plans.
When a New Car Loan Makes Sense:
- Your business has strong cash flow and wants maximum tax benefits.
- You prioritise reliability, warranty coverage, and the latest features.
- You plan to keep the car long-term (5+ years).
When a Used Car Loan Makes Sense:
- Your business needs to minimise upfront costs.
- You’re buying a reliable late-model used car.
How to Get Approved for a Car Loan for Your Business in Australia
Getting approved for a business car loan is usually a straightforward process. For loan amounts up to $250,000, there are lenders that offer no income verification as long as your ABN has been registered for at least 2 years. Many lenders can offer approval within hours, which is beneficial if your company has urgent vehicle needs.
For larger loan amounts or if your ABN has been registered for less than 2 years, lenders may verify your income through a read-only view of your bank statements or through full financials. Requirements vary per lender and loan amount, so it’s important to consult a lending expert to know how to get approved for a business car loan.
Where to Get the Best Business Car Loan in Australia
Several lenders in Australia offer competitive business car loans. Some well-known options include:
- Major Banks (Commonwealth Bank, NAB, Westpac, ANZ)
- Non-Bank Lenders
- Specialist Car Loan Providers
To find the best lender that can meet your needs with the best rates and terms, contact our team at Dark Horse Financial.
More Questions
Can I get a car loan for a used car?
Yes, you can get a car loan for a used car in Australia. Many lenders offer financing options for second-hand vehicles, though terms may vary depending on the car’s age and condition.
Which lenders offer used car loans in Australia?
Several lenders in Australia offer used car loans, including major banks, specialist finance companies, and non-bank lenders.
Is it easier to get a loan for a new car?
It depends on the lender. Generally, it may be easier to get a loan for a new car as they are considered less risky by lenders. This often results in lower interest rates and better loan terms.
Final Thoughts
Both new car loans and used car loans offer distinct pros and cons. To choose the best option for your business, consider factors like cost, reliability, maintenance, and tax benefits.
By carefully evaluating these factors and working with a trusted lender, you can secure a loan that meets your business needs and helps your operations run smoothly.
Get a Car Loan for Your Business
Whether you’re interested in the latest model or a more budget-friendly second-hand car, we offer flexible solutions that can work for any Australian business. Send us a message today to get started.
