In business, it doesn’t matter what turns over but what’s left over. Profit and building the bottom line is all part of the game. When it comes to financing a car, or even a fleet of cars, for your business, you have to make wise decisions.

The wisest decision you can make is opting for a pure business car loan. Before you start, you must make sure you will use your car for more than 50% business purposes. Once that’s good, you can start looking for great loan deals.

The best kind of loan: chattel mortgage

A chattel mortgage is a type of commercial car loan that places a mortgage over a “chattel” – an old word for an asset. The chattel in this case is your car. You take possession of the “chattel” and pay off the loan over the loan term.

A worthy runner-up: hire purchase

A similar loan product is a hire purchase. A hire purchase does not give you immediate possession; you are “hiring” the car from your financier. This can have accounting benefits – though it’s best to ask your financial professional which one is best.

Why chattel mortgages save you tax and interest

Business can reclaim the GST paid on the purchase price. You can claim it on your next BAS. You can also claim the fuel input tax credit, deprecation on the car and interest paid on your repayments.

Because a chattel mortgage is a type of secured loan, lenders and financiers allow you access to lower interest rates. Beware: if you default, your lender can repossess the car!

Why chattel mortgages are flexible

Businesses are unique and chattel mortgages can be tailored around your requirements instead of the other way around. You can set up chattel mortgages with extended loan terms – or shorter ones if you so wish. Some loan terms can go up to 7 years. You can also reduce your monthly/regular repayment by structuring a balloon payment, a lump sum due at the end of the loan.

Why chattel mortgages help your business cash flow

Chattel mortgages are usually cash flow neutral. That means instead of using cash-on-hand to purchase a car, you can get a chattel mortgage and borrow more than 100% of the car’s value. That means you can pay off insurance, registration and other extras within the same loan. Many lenders will also adapt to your business cycle. Some businesses may have seasonal cash flow and payments can be centred them.

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