When it comes to hire purchase and cars, a lot of business owners can become confused, because, let’s face it, there is nothing more confusing than trying to figure out what type of business car finance you need. At Australian Credit and Finance, we are here to make things easier and explain how a hire purchase could work for you and your business car needs.
Hire Purchase Explained
Basically, when you choose to hire purchase your business car, the lender is purchasing the car for your business and then hiring it back to you over a set period of time, with a fixed payment schedule. This repayment schedule is normally paid monthly.
Any interest charged stays the same throughout the period of the hire purchase. Your business is responsible for the ongoing costs associated with the upkeep of the car, such as registration, insurance and any maintenance requirements.
You do not own the vehicle in this case though, so don’t take on any of the liability that owning a vehicle creates.
Once the term of the hire purchase comes to an end, there will be two options available to you:
- Provided all terms of the contract have been satisfied, you can choose to take ownership of the vehicle, or
- You can sell the vehicle if you have no further use for it or want to upgrade
What Business Type Benefits From a Hire Purchase?
This type of business car finance is best suited to sole traders or small to medium sized businesses who are using the car predominantly for business purposes.
If you do choose to use the car for any personal use, you’ll need to declare fringe benefit tax at tax time. Speak to your accountant or tax professional if you’re unsure of your tax liabilities.
If you’re looking for a finance solution that provides minimal setup, then choosing to get your vehicle through a hire purchase is your best option.
Hire Purchase Benefits
As a business owner, there are many benefits associated with getting your business car via a hire purchase contract. Some of these include:
- Flexibility in contract terms
- Fixed interest rates
- You know the upfront costs (no capital outlay required)
- Tax deductions for vehicles used for business purposes
- No GST on monthly rental or residual payments (charged on fees and interest only)
- If you are GST registered, you can claim the full GST amount back
- The vehicle provides the security for the finance
At Australian Credit and Finance, we have access to over 13 lenders Australia wide. This means that we can access the best interest rates, find the right price and get the best deal that suits your needs.
We understand that business car finance can be confusing. It’s difficult to know which finance option is best suited to your needs. That’s why we have business car experts ready to help you with all your business car loan questions. Call one of our team members today on 1300 735 557.
If you’ve decided that a hire purchase is your best option for accessing your next business car purchase, get in touch with a team of experts today. We can have you set up within 24 hours!