Types of Business Car Finance

There are several different business car finance options.

Low Doc car loans are normally financed through:-

Chattel Mortgage, or

Commercial Hire Purchase (CHP)

Chattel Mortgage (This is a common form of business car finance)

A dealer invoices the client for the goods. The invoice and the deliver to address must be made out to the customer.

The asset is “owned” by the client, for  interest deductibility purposes and asset depreciation.

From day one the title is vested in the clients name.

A Chattel Mortgage may be suitable for clients on a cash accounting basis for GST. Customers on either an accrual or a cash accounting basis for GST can claim the full GST component when lodging their next BAS statements

A Chattel Mortgage may be registered with ASIC and/or the Land Titles Office under a Bill of Sale.

Commercial Hire Purchase(CHP) 

The car dealer invoices the lender.

The title doesn’t pass to the customer until all the payments are made.

The asset is effectively “owned” by the customer even though the title does not pass until the end of the loan. This is for asset depreciation and interest deductibility purposes.
• Clients on an accrual accounting basis for GST can usually claim the full GST component back at the start of the loan.
• Clients on a cash accounting basis for GST must claim the GST component back proportionately across the loan term. For this reason, clients on a cash accounting basis for GST are unlikely to be suitable for CHP.

Balloons and Residuals

As a guide the following may be used.
1 to 3 year loan term – maximum 50% residual/balloon
Greater than 3 to 4  year loan term – maximum 45% residual/balloon
Greater than 4 to 5  year loan term – maximum 35% residual/balloon

The above is a guide only. All this is information only and professional advice should be sought for selecting business finance.

Low Doc car loans are only available for where the vehicle is to be used for commercial purposes.