If you are starting a business or looking to upgrade your car, getting a business car loan could be the best decision. There are several online platforms such as Driva that can make this process very easy for you. Here are some of the benefits that come with these loans.
What Is A Business Car Loan?
When companies apply for car loans for commercial purposes such as transporting equipment, work-related operations, completing jobs, visiting clients, it is known as business car loans. There are many credit unions, finance companies, banks, and alternative lenders who provide such loans.
It is quite similar to a consumer car loan, but it requires many more documents. One can ask for business car loans for both old and new vehicles. A vehicle obtained through a commercial car loan can be used for both personal, business use. However, you have to show the business-related causes only while applying for the loan.
Benefits Of Getting A Business Car Loan
The most important thing to look for in a business car loan is the options for the downpayment, repayment terms, and interest rates. There are many lenders who cover up 100% of the cost of the commercial vehicle and have an interest rate as low as 2.49% APR.
However, if the vehicle is old, the lenders may not be ready to finance the whole cost. Many times, we have seen lenders not agreeing to finance loans for commercial cars that are five years old.
It is because any vehicle is a liability, or to be more precise, a depreciating asset. It doesn’t matter if you buy a high-end luxury car for personal use or a commercial truck for business; their prices start to depreciate as soon as they come out of the showroom.
That’s why lenders find it risky to give loans for old vehicles. But, if your firm needs the car for the long-term and is willing to eliminate the depreciation cost from the tax return files, purchasing a commercial vehicle could be a good option. There are several benefits of getting a business car loan as well. Let’s take a look;
You May Qualify For Tax Deductions
If you are going to use your car for business purposes, then this can be a tax deduction. You will need to keep good records and detailed documentation that proves the usage of the vehicle was strictly business-related. If it is not used exclusively for work, then these deductions may not apply. Getting approved by a bank or financial institution should ensure you get this deduction.
You Can Get A Car Loan With Bad Credit
If you have bad credit or no credit history, then getting a business car loan from the bank might be an appealing option. These loans usually come with lower rates of interest and can help save money in the long run. You will also not need to deal with any middlemen when applying for these types of loans.
Opportunity To Grow Your Business
Having a car is a great way to build your business. You will have the opportunity to meet new clients, visit your existing client base, and much more. These loans can be used for any type of vehicle, including trucks, RVs, or motorcycles.
Competitive Interest Rates
Banks usually offer lower rates of interest on business car loans compared to personal ones. The interest rates on business car loans also depend on the terms and conditions that you agree to. For example, you may need to put down a higher down payment or have a lower credit score, but these are usually common with other types of loans as well.
Quick Approval Times
Getting a loan to purchase or upgrade your vehicle can be done very easily. Depending on your lender, getting approved could take as little as a few hours. You might find it advantageous that most banks do their best to get this process started as soon as possible.
Benefits Your Cash Flow
Getting a car loan for business purposes means that you might be able to free up some cash that you would have used to buy the car outright, to instead invest in other aspects of your business. For instance, you can use your extra cash to purchase inventory or expand your business premises. This will only help the growth of your company.
When you get a business car loan, it is very easy to make repayments. You can pay your lender directly or set up an automatic payment plan for easier budgeting. Often, these repayments are made monthly, but your lender may have some flexibility and be able to offer other arrangements like weekly or fortnightly repayments.
Car Fringe Benefits
One of the most important benefits of a business car loan is choosing which vehicle will be available for multiple work purposes and which one will be available for employees. If you think your firm needs a car urgently, you may buy a new car for your personal use, and then transfer it to your firm. It will have two benefits. Firstly, you got a new car for your personal use, and you will be eligible for certain tax benefits for donating your car to your company.
Finding Equipment Finance Option Is Easy
Almost 40% of the Australian equipment finance portfolio is derived from financing fleets of lightweight commercial vehicles or company cars. It may generate a certain idea of how much money is circulating in this business. Therefore, if any company wants to apply for a business car loan, it should find an equipment financing option in no time.
The Bottom Line
Once a business becomes financially stable and expands its operation, it might be in dire need of owning a commercial vehicle. However, it’s not always easy to buy a car with an upfront cost, no matter how large the business is.
So, for small and large businesses alike, a business car loan is an easy option to own a car at a low cost. If the interest rate is low and the lender is willing to cover most of the cost of purchasing the vehicle, there’s no reason not to take advantage of it.