Business Car Finance

Business runs cars – get the support you need with a great commercial car finance deal from Savvy.

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on May 8th, 2024       

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Small business, medium business, enterprises – all business can do better with lower rates on car finance and more freedom to choose. Savvy gives you the options to make the most of your investment in vehicles. We offer a range of car loan and lease products tailored to suit your needs, sourcing our loans from over 40 of Australia’s top lenders.

We compare a wide range of the most popular and cost-effective car finance products on the market. Make a cash-flow neutral purchase with a chattel mortgage or hire purchase and claim the GST, interest and depreciation. Add balloon payments to reduce monthly repayments. Alternatively, you can opt for a finance or operating lease to drive your car without the worry of ownership. Get a free, no-obligation quote today!

What is business car finance and how does it work?

Business car finance covers a range of products tailored to small, medium and large businesses when it comes to buying or leasing vehicles for commercial purposes. There are four main products to consider under the business car finance umbrella, which are:

Chattel mortgage

chattel mortgage is the only type of business car finance whereby you own the vehicle from the start. It’s structured in much the same way as a secured car loan, with repayment periods extending from one to seven years on a weekly, fortnightly or monthly basis. However, it offers borrowers a range of tax benefits.

Hire purchase

Under a hire purchase agreement, your financier purchases the vehicle on your behalf and hires it out to you in return for ongoing payments. Once your business has repaid the full purchase price of the vehicle, ownership is transferred to you. This type of arrangement may be suited to businesses requiring off-balance sheet accounting.

Finance lease

Under a finance lease, your financier buys a car and leases it to your business, with monthly costs charged to hire the vehicle. Up to 100% of these payments are tax-deductible, with terms ranging from one to five years. At the conclusion of your lease, you can choose whether to buy the car by paying the residual out of pocket, trade in or sell the car to cover the residual and lease another car or refinance the residual and extend the term of your lease.

Operating lease

Operating leases work in the same general way as finance leases, except they don’t come with a required residual payment and instead enable you to hand the car back after the lease. On-road costs are also typically sorted for you and incorporated into your loan, making it more expensive but leaving the risk of vehicle obsolescence with the lessor, not you.

You can get a free, no-obligation quote for any of the above products with Savvy today. Speak with one of our friendly consultants about your situation and we can get to work sourcing finance for your business vehicle before you know it!

What tax benefits are available through business car finance?

The tax benefits available to your business through one of these agreements will vary depending on the type of arrangement you take out and the nature of your business’ usage of the vehicle. These include:

  • Chattel mortgage: GST on the purchase of the vehicle, interest on loan repayments, depreciation and instant asset write-off (if eligible)
  • Hire purchase: GST on the purchase (claimable by the financier), interest on loan repayments, depreciation and instant asset write-off (if eligible)
  • Finance lease: up to 100% of the cost of leasing payments
  • Operating lease: up to 100% of the cost of leasing payments

As mentioned, the amount you’re able to claim will be subject in part to your business’ usage of the vehicle. For example, if you take out a chattel mortgage for a car and your business only uses it 75% of the time for business purposes, you can only claim tax credits up to this percentage. 

This information only serves as a guide, so speak to your accountant or a tax professional for more information specific to your situation.

What is a residual payment and how do they work for commercial car finance?

A residual payment, also known as a balloon payment or a residual value, is a lump sum attached to the end of a loan or lease to be paid at the conclusion of the agreement. Residuals work differently depending on whether you’re taking out a commercial loan or lease.

Car lease residual

Residual values for car leases are set by the ATO and are intended to reflect the estimated value of the vehicle at the end of your term. The minimum required residual values for car leases are as follows:

Lease term Residual value
12 months
65.63%
24 months
56.25%
36 months
46.88%
48 months
37.5%
60 months
28.13%

Source: Australian Taxation Office (ATO)

These only represent minimum guidelines, so you may find your leasing company sets your residual at a higher cost.

Car loan residual

Unlike leasing residuals, those attached to a chattel mortgage can be set at whatever amount you or your lender requires. It’s important to note that having a residual attached to a loan will reduce its month-to-month cost but increase the amount of interest charged overall. You can see how this works in the table below:

Balloon payment Repayments Total interest Total saving
$6,000
$519
$7,105
N/A
$3,000
$560
$6,587
$519
$1,500
$581
$6,328
$777
$0
$602
$6,069
$1,037

Source: How to Pay Off Your Car Loan Faster – Savvy. Calculations based on a $30,000 car loan repaid monthly over five years with a 7.50% p.a. interest rate.

How do I qualify for business car finance?

Each lender or lease company will have different assessment criteria for their applications. However, you can expect the following general points to apply:

  • You must be at least 18 years of age
  • You must be an Australian citizen or permanent resident
  • You must have an active ABN or ACN and GST registration and have been running your business for at least 12 to 24 months (solutions may be available for businesses who don’t meet this requirement)
  • You must meet any minimum personal or business credit requirements
  • You must submit any documentation requested by your lender

What documents are required for business car finance?

Again, the specific documentation requirements will vary depending on your lender or leasing company. However, you can expect to submit some (or all) of the following:

  • Proof of identification, such as driver’s licence and passport
  • Proof of ABN or ACN registration
  • Business tax returns from the last one to two financial years
  • Up to six months’ worth of business bank statements
  • Business Activity Statements (BAS)
  • Information on business assets and liabilities
  • Trust deed (if applicable)

If you don’t have tax returns and want to purchase your car, you may have to apply for a low doc car loan. This product allows businesses to access the funds they need for their vehicle purchase by using alternative documentation. This may require a selection of the following:

  • Proof of identification
  • Business revenue projections
  • Trust deed (if applicable)
  • Signed declaration of your business income
  • Letter from your accountant, confirming the projected income
  • Details about your business, its activities and how revenue is earned

How much can I borrow with a commercial car loan?

Commercial car loan borrowing power is decided by several factors, such as the following:

  • Your business’ revenue and expenses: the amount your business has available after expenses are deducted from all your incoming cash will have a large say in determining what’s an affordable deal for you.
  • The value of the asset you’re buying: because your loan is secured by your car, the loan amount will reflect its cost. You may be able to borrow up to 100% of its purchase price, or sometimes more if you include on-road costs like registration and stamp duty.
  • Your lender’s minimum and maximum loan amount: of course, you can only borrow within the range your lender allows. Many lenders don’t have a set maximum loan amount, but minimums do apply. When you apply with Savvy, we’ll match you with a lender whose minimum and maximum (if applicable) loan amount suit your borrowing needs.

How much will my business car loan cost?

There’s also a range of variables that can impact the cost of your business car loan. These include:

  • Interest and fees: the higher your rate and more costly the fees charged, the more you’ll pay as part of your loan agreement. On a $30,000, five-year loan repaid monthly, the difference between 7.50% p.a. and 8.50% p.a. is over $850.
  • Loan size: larger loans will attract more interest. For instance, a $30,000 loan repaid monthly over five years with 7.50% p.a. interest will attract $6,069 in interest, but increasing the sum to $50,000 causes this to rise to $10,114.
  • Loan term: the longer you take to repay the loan, the greater your interest spend will be. Compared to the $30,000 loan example mentioned above, lengthening your term to seven years will cost $8,653, which is almost $2,500 more.
  • Deposit: by putting up a larger deposit, you’re reducing the size of your loan and cutting down on your interest spend as a result. On the same $30,000 loan example above, a $3,000 (10%) deposit would reduce your interest by over $600.
  • Repayment frequency: making additional repayments will help you pay off your car loan faster and save you on interest. By contributing an extra $100 per month on a $30,000, five-year car loan repaid monthly at 7.50% p.a., you’d save over $1,000 and have your debt cleared ten months early.
  • Residual: as mentioned, whether you have a residual and its size will affect the cost of your loan.

However, as discussed above, you may not be liable to pay any interest if you use the car for business purposes 100% of the time. If you don’t, though, it’s important to compare your commercial car finance options.

How should I compare car finance options as a business owner?

It’s always essential to compare as many options as possible when looking at what finance option is the most suitable for your business. Some of the factors to think about include:

  • Consider your business’ needs and situation: thinking about what you need as a business will help you determine the best type of finance. If you want to continually update your vehicles, for instance, leasing may be a more suitable option than a chattel mortgage.
  • Review the eligibility criteria: each lease or loan provider will have different qualification requirements, so it’s crucial to ensure you and your business meet these before formally applying.
  • Look at the costs: it’s worth taking the time to find out how much you’d stand to pay on interest and fees, including establishment, ongoing and early repayment costs, before you formally apply.
  • Ensure your car is eligible: it isn’t just about the business, but also whether your vehicle meets the criteria set in place. Each company will have criteria relating to maximum age and condition.
  • Loan size requirements: if you’re looking to take out a particularly small loan, make sure your lender can cater to your needs.

When you apply for car finance with Savvy, we’ll do all the heavy lifting for you. We’re partnered with a diverse range of commercial car finance companies, enabling us to compare a wide variety of offers based on your business’ profile and needs. You can get a free, no-obligation quote with us today!

We’re the Savvy choice for business car finance

Your business car finance questions answered

How much can I borrow?

You can borrow 100% of your car's purchase value and include extras such as insurance and extended warranties.

What loan terms are available?

Yes, we can tailor loans ranging from 12 months up to 7 years for chattel mortgages and hire purchases.

What is the difference between a chattel mortgage and a hire purchase?

A chattel mortgage and hire purchase work the same in principle but are different “on paper.” In a chattel mortgage, the purchaser takes ownership. In a hire purchase, the bank or lender is the owner. This makes a different for accounting for assets vs. using operating capital. Your accountant may decide one option is better for your business over the other.

Do I need to put down a deposit for a chattel mortgage or hire purchase?

No. You can borrow 100% of the car’s value, and even cover expenses such as registration, insurance, and maintenance.

I run a seasonal business; can I apply for a chattel mortgage or hire purchase?

Yes, we can arrange seasonal repayment plans according to your requirements.

Are there any borrowing or finance caps in place?

No – when it comes to vehicle finance, you’re only limited by what your business can afford to repay on a monthly basis. Whether you’re a small business looking for $5,000 to put towards your vehicle purchase or a more expansive enterprise looking to buy or lease a fleet of cars, we’ll connect you with a lender and product suited to your situation.

Do I need to put down a deposit?

No – however, a deposit can help you get approved for a chattel mortgage if you’re a small or startup business, or one with a poor credit rating. By putting down a deposit, you’re reducing your lender’s feeling of risk in you as a borrower. Deposits are otherwise optional, however, and don’t apply at all when it comes to car leasing.

Is business car financing available to self-employed workers?

Yes – self-employed workers are treated in the same way as any other business when it comes to financing their car: provided you meet your lender’s net income requirements and can supply your previous two years’ worth of tax returns, you can apply for the same commercial car finance product that any other small or large business can.

What other vehicles are available with business finance?

You’re not limited to cars, either: we can help you get approved for anything from trucksaircraftmachinery or other business equipment.

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