Many business owners wonder whether financing a car under their business is a smart financial move. The right financing choice can help you maximize tax savings, improve cash flow, and even unlock GST benefits. If you’re an ABN holder, purchasing a vehicle through your business can offer significant advantages—but it’s essential to understand the best approach.
In this blog, we’ll explore the benefits of financing a car for business use and how buying on an ABN can help you save money.
Business Car Finance vs. Personal Car Finance
Before diving into the financial benefits, it’s important to understand the difference between business and personal car loans.
Personal Car Finance
- Taken out by an individual for personal use.
- No tax benefits or deductions on repayments or interest.
- Less flexibility in structuring loan terms.
Business Car Finance
- The vehicle is used for business purposes and financed under the business name.
- Potential tax deductions on interest and depreciation.
- Flexible loan options tailored for business owners, including low-doc loans for ABN holders.
- Possible GST claims on the purchase price (if GST-registered).
Financing a vehicle under your ABN can lead to significant financial advantages, especially when structured correctly.
How Buying on an ABN Can Save You Money
If you have an ABN and are using the vehicle predominantly for business, here’s how you can save money:
1. Tax Deductions
- Interest on a business car loan is tax-deductible.
- Depreciation deductions allow you to claim a percentage of the car’s value each year.
- The Instant Asset Write-Off scheme (subject to eligibility) allows businesses to claim the full cost of the vehicle in the year of purchase.
2. GST Benefits
- If your business is registered for GST, you can claim the GST portion of the purchase price as a credit.
- GST can also be claimed on running costs like fuel, servicing, and insurance.
3. Running Cost Deductions
- Expenses such as fuel, insurance, maintenance, and registration can be claimed as business expenses, reducing taxable income.
- Logbooks help track business use, ensuring maximum deductions.
Financing Options for Business Car Purchases
There are several financing options available for business vehicle purchases:
1. Chattel Mortgage
- Ideal for businesses wanting ownership of the car from the start.
- Allows for GST claims upfront.
- Interest and depreciation are tax-deductible.
- Balloon payment options help lower monthly repayments.
- No doc and Low doc car loan options.
2. Commercial Hire Purchase
- The lender owns the vehicle until the final payment is made.
- Businesses can still claim depreciation and interest.
- Fixed repayments help with budgeting.
3. Finance Lease
- The lender owns the car, and the business leases it.
- Monthly lease payments are tax-deductible.
- At the end of the lease, businesses can either purchase the car or lease a new one.
When Business Car Finance Makes Sense
Business car finance is beneficial when:
- The vehicle is used predominantly for work (typically more than 50%).
- You want to maximize tax deductions and GST benefits.
- You prefer to finance the car rather than pay upfront to preserve cash flow.
- Your business needs reliable transport to operate efficiently.
Things to Consider Before Financing a Business Vehicle
Before taking out a business car loan, consider:
- Loan Structure: Selecting the right loan type is key to maximizing tax deductions. An experienced finance broker will assess your business goals and budget to recommend the best financing option for your needs.
- Interest Rates: Comparing a range of lenders to find the lowest rate and best loan terms for your business. Our finance experts match you with the most competitive options based on your circumstances.
- Loan Term: Ensuring it aligns with your business’s financial goals.
Terms range from 1 to 7 years. - Balloon Payments: Balancing lower monthly repayments with a larger final payment. Our easy-to-use business finance calculator allows you to adjust the balloon amount and instantly see how it impacts your repayments, helping you make an informed decision.
AAA Finance | The Business Car Loan Specialists
Financing a car for business can be a smart move, especially for ABN holders looking to save money through tax benefits and GST credits. However, choosing the right loan and structuring it correctly is crucial to maximizing savings.
At AAA Finance, we specialize in business car finance, helping you find the best loan tailored to your needs. Whether you’re a sole trader or running a fleet, our team can guide you through the process.
Contact us today!
