If you're an entrepreneur, you know how important it is to have a reliable vehicle for business use. Whether you're a business owner or self-employed with an ABN, a car is likely essential for getting around, meeting clients and tending to your work. If a dependable work vehicle sounds like a dream to you because you currently don’t have the loose cash to buy one, listen up! This is where an ABN car loan comes in.
In this article, we'll take a look at what you need to know about commercial car finance, including the requirements, benefits and how to apply.
Can I use my ABN to get a loan?
The short answer is yes! Many car loan lenders are specifically tailored to work with ABN holders. These specialist lenders understand the unique needs of business owners and offer car finance options specifically designed to meet those needs. Commercial car loans have comparable interest rates to regular personal loans but come with some tax breaks. This means that if you're an ABN holder, you may be able to get a better deal on a business car loan than you would if you were applying as an individual.
How does ABN finance work?
An ABN loan works in a similar way to traditional car loans. You'll need to apply for the loan, provide the required documentation and go through the approval process. However, there are a few critical differences in loans for business vehicles.
One of the main differences is that, for ABN loans, you'll need to demonstrate that the car will be used for business purposes, such as visiting clients or transporting goods. In most cases, you’ll need to show that 50% or more of your vehicle use is dedicated to your work. Check out our other article to learn more about how to keep track of your work-related expenses.
Additionally, most lenders will require you to have a minimum of six months to year-long trading history and a good credit rating.
Another difference is that car financing for businesses can be more straightforward with a low doc car loan. Low-doc car loans are a type of loan designed explicitly for ABN holders that don't have the usual documentation required by most lenders and finance companies. This includes financial statements, tax returns, and other records that can take significant time to gather. With low-doc loans, you can quickly and easily obtain the financing you need to purchase a business vehicle without the hassle of providing all the usual documentation.
Is it better to buy a car on ABN?
Whether or not it's better to buy a car through your business depends on your individual circumstances. In many cases, the capital outlay for buying a new car outright could be too risky for small businesses, then an ABN car loan may be the best option for you. There are several benefits to buying a car on ABN, including:
As a business owner, you may be able to claim the cost of the car as a tax deduction. This will help to reduce your tax bill and improve your cash flow.
Other tax breaks:
A secured ABN loan often comes with lower interest rates than a traditional car loan. This can help to keep your monthly repayments low.
If your business is GST registered, you will be able to claim back the GST on the purchase price of the car, plus the monthly repayments will be GST free.
Low running balances:
Many businesses have low running balances, which can make it difficult to obtain car finance. Many finance companies offer a low-doc car loan option designed for businesses with low or fluctuating income.
That said, remember that ABN car finance isn't the only option for business owners. If you're looking for a new car for personal use in equal parts to your business activities, then a traditional car loan may be a suitable option for you.
The benefit of taking out a personal loan and purchasing a car under your own name is that you are free to sell the vehicle without the concern of how it affects your business finances and assets. You will still be able to claim back business expenses on your personal tax returns but you’ll miss out on deductions and other tax breaks.
What are the ABN car loan requirements?
When it comes to obtaining car finance as an ABN holder, there are a few things you need to know. First and foremost, you will need to provide proof of your ABN, along with your bank statements and tax returns. These documents will help the lender determine your financial situation and your ability to repay the loan.
The requirements for ABN car finance vary depending on the lender. However, there are a few common requirements that most lenders will have.
The most common requirements among Lenders and Finance brokers:
- A minimum of six months trading history
- A good credit rating
- Proof that the car will be used for business purposes
- ABN, business activity statement and bank statements
An important consideration for a GST-registered company is a business activity statement (BAS). This document shows the income and expenses of your business, and it's important for the lender to see that your business is profitable and that you have a steady income.
The interest rate on an ABN car loan can vary depending on the lender, but most lenders will offer rates that are slightly higher than traditional car loans. This is because the risk of default is higher for ABN holders, as they may not have a steady income.
That’s why many opt for a secured business car loan, also known as a chattel mortgage. With a chattel mortgage, the car you purchase acts as collateral for the loan, which can result in a competitive or even lower interest rate compared to unsecured car loans.
There are also tax implications for ABN holders taking out a car loan. The usage of your motor vehicle dedicated to business purposes, might all be tax deductible. This means that if your new car is solely for business use, you could claim the full loan amount for a tax deduction, which can help offset the cost of the loan.
Additionally, utilizing a service like Driva can help you find the most affordable business car loan with absolutely no hidden costs. We search and compare the thousands of financing options available, in just minutes, so you can focus on your business and be confident that you are getting the best deal possible.
Can you finance a car as a sole trader?
Yes, you can finance a car as a sole trader, but you'll need to have an ABN and be GST registered. Many Australian business owners and self-employed contractors struggle to provide the usual documentation required by most car lenders and finance brokers.
This is where low-doc car loans come in as a saving grace for self-employed individuals who are unable to provide traditional documentation like tax returns, business activity statements and other financial reports. These loans often require low documentation, making it easier for those who don't have a steady income or a long-established business to obtain financing for their vehicle.
That's why Driva finds low doc car loans from finance companies that only require you to prove you are able to afford repayments using only your ABN, your company’s bank and business activity statements. This can make the process of being approved even simpler than proving your creditworthiness as an individual.
Getting a car loan for your business through an ABN is a smart choice for both established and new ABN holders.
By utilizing Driva’s intelligent platform, you can find commercial or low-doc loans and secure the work vehicle you need. With Driva, you can easily compare multiple loan options from 30+ lenders, taking into consideration your individual circumstance and desired loan terms. We do the work to find you the right loan, so you can be certain that your monthly repayments are affordable and align with your goals.
Drive your business forward today with the right commercial car loan!