Car finance solutions for your business

Need a new car, or a fleet of cars for your business? If so, we have some good news! Smartline’s car finance solutions can help you get the car or fleet of cars you need to do business, without paying the full cost at once. And to make this news even better is the possibility of tax incentives when purchasing. Your experienced Smartline Adviser and your tax accountant can help you negotiate the options to find the right deal for you.

To get you started, we’ve put together a simple guide to car finance options to help you choose the solution that’s right for your business.

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Different car finance options for business

If your car is used for business purposes only, there are several finance options: a chattel mortgage, a low-doc loan and an operating lease.

chattel mortgage involves borrowing money from a lender to purchase the car. The car is used as security against the loan. Depending on your situation, you may have the option to either borrow the full amount, or pay a deposit and borrow part of the amount. You may also have the option to reduce your monthly repayments by setting a residual value or final balance.

Generally, chattel mortgages are very flexible and offer a range of lending periods, usually from two to five years. With a chattel mortgage, you may be eligible to claim tax credits or interest paid on tax. Talk to your tax accountant to see if there’s a tax advantage to your business to purchase vehicles this way.

low-doc loan requires you to provide less documentation than a chattel mortgage. This might be a good solution if you’re a sole trader or small business owner but, under this arrangement, you must be able to prove that the car is for business use only.

An operating lease means that the lender purchases the car and then leases it to you. The advantage of an operating lease is that the lender assumes responsibility for any risks associated with ownership. You pay regular instalments, like rent, for the period of the lease. At the end of the lease period, you have the option to renew the lease, update the vehicle, end the lease, or purchase the vehicle at a fair price.

If you’re considering buying cars on behalf of your employees, a novated lease might be the way to go. A novated lease is an arrangement made between an employee, an employer and the lender. The lender purchases the car and the employer deducts a fixed amount from the employee’s pre-tax income to pay the lender. Employees can use the car for both personal and business use.

If you are an employer, you may have the option to purchase the employee’s choice of car at a fleet discount, which is not available to individual buyers. You, or your payroll department, will then need to set up the employee’s pre-tax income deductions. There may be tax advantages in using a novated lease to finance cars for employees. This can be a great option for rewarding your employees. It can encourage staff loyalty and help with staff retention.

How do you decide?

The right car finance solution for you will depend on the type of use and your tax situation. Book a chat with your Smartline Adviser and speak to your tax accountant to work out which solution will suit you and your business.