Accounting & Finance

Guide to Business Vehicle Finance

Written by Peter Watman

Purchasing and upgrading work vehicles can be a significant task for those who are self-employed or who run a small business. Whether you are a carpenter or construction worker, financing these vehicles can free up cash flow, tap into tax benefits and take advantage of the current record low interest rates. 

Acquiring knowledge and an understanding of business vehicle finance allows you to plan for the future, as well as grow and expand your business. Keep reading this article to find out more. 

The 3 Types of Business Vehicle Finance

Depending on what paperwork you have on hand or what you are willing to divulge to a lender determines the type of business loan that you can access. There are 3 types of business loans or chattel mortgage options – Full Doc, Low Doc and No Doc business loans.

1.      Full Doc Vehicle Loans

This type of loan requires full proof of business income.  This may be in the form of current tax returns, business activity statements, Profit and Loss Statements and/or bank statements. Every lender has different documentation requirements which are ever changing in the current financial environment.

2.      Low Doc Vehicle Finance

Usually, tax returns are NOT required for low doc car finance and therefore suits those who may be behind in submitting their taxation. Lenders do require some form of income proof.  Some accept an accountants’ letters stating an estimate of projected earnings or a recent BAS statement showing revenue or sales turnover. Bank statements are also a common form of low documentation.

3.      No Doc Vehicles Loans

As the name implies, no documentation is required to get this type of loan. You will, however, need to declare an estimate of earnings, own or have a property mortgage and have a confirmable credit reference on a previous or current loan. Most lenders also require your business to be running for a minimum of 2 years to qualify for this type of chattel mortgage.

The Benefits of Business Vehicle Loans

Business finance offers many benefits to the small business owner. These include freeing up cash flow, tax incentives and upgrading vehicles to improve efficiencies.

Free Up Cash Flow

Interest rates are at record lows and the cost of borrowing money has never been so cost effective. Use your cash on hand to either save for a rainy day or covid lockdown. Alternatively, invest this money into more products, advertising and marketing, or use as a deposit for commercial property. This could ultimately grow your business to new heights.

Tax Incentives

Keep more of your money in your pocket. The GST can be immediately claimed when purchasing a business vehicle. Interest paid on the loan is a tax deduction. Additionally, the instant asset write off has once again been extended, now rebadged as ‘Temporary Full Expensing’. The ATO states that this government incentive is to support businesses and encourage investment.

Upgrade your Work Vehicle or Invest in New Equipment

Having the right equipment for the job saves time and money. Trades people may dream of the ultimate Ute with all the add-ons, including canopies, roof racks, tow bars and lift kits.  These accessories can be incorporated in the new car purchase price and therefore the finance amount. Equipment and machinery, from tractors and excavators to lathes and spray booths can get you ahead of the competition. Think about how your business can benefit from a new vehicle or equipment purchase!

Low Interest Rates

Lenders tend to offer a more competitive rate to fund business chattel mortgages than that of consumer loans. Rates are already at an all time low. All business vehicle loans have a fixed interest rate, so now is the time to lock in a 5- or 7-year loan before the inevitable interest rate hike.

How to Qualify for Business Finance

The basic requirements for a business loan are firstly having an active ABN and secondly using the vehicle for at least 50% business related use. Sole traders, self-employed individuals, trusts, partnerships, companies and corporations can all access business vehicle loans.

All Australian businesses must have an ABN. If you are GST registered, then you are already providing proof that you are turning over more than $75,000 per year. Most lenders require your ABN to be active for at least 12 months and in the case of no doc car loans, 24 months. In the current Covid environment, we have seen a significant change to people’s employment types and styles. There are now some lenders offering finance to new ABN holders, if they have industry experience and good credit.

The second requirement is that you must be able to justify that the vehicle being purchased will be used ‘predominantly’ for business related use.  Predominantly, as defined by the ATO, is 50% or more.  Each and every business is different. A carpenter that goes to cyclone ravaged areas to help in the recovery can justify the purchase of a caravan or camper trailer as business accommodation. An excavator driver who leaves machinery at the work site and travels by motorbike to and from said site can justify both the excavator and the motorbike.

What Can be Purchased Using a Business Loan

All types of vehicles, from motorbikes to cars, utes, mobile coffee vans, delivery trucks and semi-trailers can be financed using a chattel mortgage. 

Machinery and equipment can also be financed. Whether you are a farmer, truck driver, earthmoving business, involved in manufacture or repair or are simply office bound, your business needs can be financed.

How to Get Your Finance Approved First Time, Every Time!

Business owners are experts in their field just as finance brokers are experts in theirs. When your business needs finance, an experienced finance brokerage can save you both time and money, and will have access to many different lenders who specialise in business finance.  They will match you and your particular set of circumstances with the most suitable lender to ensure a positive outcome at the best rate possible. 

“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."

About the author


Peter Watman

Peter Watman has a passion for economics and business finance and is keen to share his finance knowledge to assist fellow small business owners grow and expand. In his spare time, he loves to go boating and fishing.