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Loans Australia has access to both secured and unsecured car financing. We can finance both new and used vehicles purchased through a dealer or private sales. We can also finance vehicles at any age (we don't discriminate on age). We have a large range of financiers available. Loans Australia has access to commercial hire purchase, chattel and leasing options as well as normal car loans. We can also arrange novated leases for employees. Some of our lenders have nil early payout penalties and no application fees. Loans Australia has an online system with some of our lenders, allowing for an indicative approval within only a few minutes.
Loans Australia has recently introduced new lenders who will do low-document and credit impaired (poor credit history) hire purchase and lease financing. We can setup leases for companies with multiple paid or unpaid defaults, leaseback facilities, new and used, start-up ventures considered and no tax returns required. Leases up to $1,000,000 in NSW and Victoria will be considered.
Loans Australia has many years experience in structuring the best finance deals for its clients, please read below to gain a better understanding of the different car loan structures available.
Commercial Hire Purchase (CHP)
Chattel Mortgage
Finance Lease
Operating Lease
Novated Lease
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If your aim is to ultimately own the motor vehicle you may find a CHP contract very suitable.
Individual business customers, who wish to place a deposit into their finance contract (not mandatory), or nominate the value of the residual (final instalment) on their contract, will normally use a Commercial Hire Purchase agreement, as this type of finance contract offers a lot of flexibility for the customer. The customer can choose the residual amount which will allow them to make monthly repayments to suit their budget.
During the term of the agreement the financier owns the vehicle and the ownership is automatically transferred to you when you make the final payment. You also have the option of purchasing the motor vehicle in full at anytime during the term.
Under both a Chattel Mortgage and Commercial Hire Purchase agreement, the Goods and Services Tax (GST) is contained in the purchase price of the vehicle, but does not apply to the monthly repayment or residual (final instalment) on the contract. Normally those individual business customers who are registered for GST purposes and enter into a Commercial Hire Purchase agreement, will apply Input Tax Credits (ITC's) to claim back some or all of the GST (up to a maximum amount of $5,183) contained in the price of the motor vehicle. Stamp duty is payable on repayments in most States and Territories. Please consult your Accountant in relation to your own situation.
Major Features of a Commercial Hire Purchase:
- Repayments are fixed and can be tailored to meet your business cash flow
- A residual payment at the end of the term can reduce the monthly repayments
- No need for a deposit
- The motor car can be purchased outright at anytime during the agreement
- The interest component of the repayments and the depreciation on the motor car can be claimed as tax deductions provided the car is used for business purposes
- Ownership automatically transfers to the owner when the final payment is made
- The loan is secured by the vehicle only so no need to secure other valuable assets
- Loan terms between 24 and 60 months
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The Chattel Mortgage was introduced to afford those individual business customers who account on a cash basis the same taxation benefits as those who account an accrual basis. This product is available to sole proprietors, partnerships and companies.
With a Chattel Mortgage, individual business customers accounting on a cash basis can claim back the GST as soon as they lodge their next Business Activity Statement (BAS).
A downside to the Chattel mortgage is that there is a charge lodged by the lender with ASIC and there is a lodgement fee of approximately $140. If a company already has a floating charge against the business then ASIC may not accept the new charge and a different option will need to be looked at.
Major Features of a Chattel Mortgage:
- The GST refund in the motor vehicle's purchase price may be paid off the loan, which reduces the amount financed and the associated interest charges.
- Repayments are fixed and can be tailored to meet your business cash flow.
- You take ownership of the goods upon delivery and the financier secures the loan by registering a charge over the goods.
- A residual (final repayment) can reduce the monthly repayments.
- 100% finance is available therefore no need for a deposit.
- The motorcar can be purchased outright at anytime during the agreement.
- The interest component of the repayments and the depreciation on the motorcar can be claimed as tax deductions provided the car is used for business purposes.
- The loan is secured by the vehicle only.
- Loan terms between 24 and 60 months.
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A finance lease is a tax-efficient tool to satisfy business needs without tying up capital. It can be used to finance 100% of the motorcar. Lease payments are made from pre tax income, not after tax profits, enabling a business to preserve cash flow and utilise the capital elsewhere in the business.
Under the terms of most finance leases, the purchaser has no option or right to purchase the motorcar either during the term or at the end of the agreement. However in most cases financiers will consider an offer from you to purchase the car for the residual value at the end of the lease term.
Where the vehicle is used for income producing purposes, a tax deduction may be claimed by the lessee. Where the amount financed is below the Depreciation Limit ($57.009), a lessee may claim the monthly repayment as a deduction. Above the Depreciation Limit, interest charges on the contract and depreciation up to the value of the Depreciation Limit ($57.009) are deductible.
Flexible contract terms from 24 to 60 months are available, and as the residual value can be varied according to the contract term, repayments can be tailored to suit your budget.
The Goods and Services Tax (GST) is included in the purchase price of the vehicle and the financier can apply Input Tax Credits to off-set this GST (to a maximum of $5,183), meaning that the amount you finance under a finance lease is therefore lower than the purchase price of the vehicle.
Where the lessee is registered for GST purposes, input tax credits may be applied to off-set some or all of the GST on both the lease rental and the residual value, depending on the amount of business use you can demonstrate.
Major Features of a Finance Lease:
- Repayments can be customised to your business cashflow.
- Payments are subject to stamp duty and GST.
- 100% finance is provided so no need for a deposit.
- You can claim the rental payments as a full tax deduction, where the motorcar is used to generate assessable income (in the course of business).
- Upon purchasing the vehicle the financier will claim back the GST, this means you finance the purchase price less GST.
- The lease is secured by the vehicle.
- Some financiers allow you to make extra repayments at certain times of the financial year to minimise your tax liability.
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An operating lease is an agreement to rent a motor vehicle for use in your business for a fixed period. It can be very efficient and effective financing strategy if you want to continually upgrade your vehicles or if you are only interested in renting and not owning your asset.
An operating lease acts as a true hiring arrangement where the asset is treated as an expense, allowing you to finance your equipment off balance sheet for accounting purposes. The financier retains ownership of the asset, and at the end of the lease period, you will return the equipment to the financier (subject to return conditions), without obligation for the residual value.
Major features of an Operating lease:
- 100% Finance, no need for a deposit (can preserve your working capital).
- Payments can be customised to suit your business cashflow.
- Avoid owning or disposing of obsolete equipment (can respond to changing markets quickly).
- Rentals are subject to stamp duty and GST.
- Keep pace with new technology without the associated risks of ownership.
- Finance equipment off balance sheet, improving key financial ratios.
- Budget and forecast more accurately.
- Takes away the worry of disposing of a motorcar with a weak re-sale value.
- Claim the full repayment amount as a tax deduction (provided the equipment is used to produce assessable income or the expense is necessarily incurred in carrying on a business. Please consult your tax advisor for details).
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Novated Leases are for employees who have the option of receiving a car as part of their salary package. The employer pays all rental payments to the financier and the employee enjoys full use of the motor vehicle. Essentially a novated lease is a three way agreement between an employee, their employer and a finance company. An employer allows an employee to purchase a car of their choice from their pre-tax salary. The employer deducts the lease payment from the gross salary of the employee, allowing the employee to pay for the vehicle in pre-tax dollars. Novated leasing can even be used for a spouse's vehicle and can be an excellent way of increasing an employee's net pay. Cars are also an attractive part of a salary package because fringe benefits tax is treated concessionally.
The employee chooses his or her own car and leases it from the financier. The employee then novates the lease to their employer, who assumes all the employee's rights and obligations under the lease, including responsibility of meeting the lease rentals. The contract is in the name of the employee who remains the registered owner throughout the lease and keeps effective control of the vehicle at all times. If the employee leaves the company, the vehicle remains with the employee. In this situation generally the employee takes over the payments or gets another employer to make the payments. This means, the original employer is not left with an unwanted car and the employee keeps the vehicle.
At the end of the lease the financier will sell the vehicle but may accept an offer from the employee to purchase the vehicle. The employee has no obligation to buy. However, in the case of a finance lease, if the sale price is less than the residual value shown in the lease contract, the employee will be liable for the shortfall. Therefore some employees see operating leases as less of a risk (since there is no residual value).
Major Features of a Novated Lease:
- The employee can lease the motor vehicle of their choice.
- The employers monthly lease payments are deducted from the employee's gross salary.
- The employer provides the vehicle to the employee for their unrestricted use including total private use.
- Can be seen as a value added benefit provided by employers to employees.
- Benefit to the employer as they don't have to manage vehicle fleets.
- Currently there is no requirement to record the lease as either an asset or liability on the company's balance sheet.
- The employer would normally be entitled to an income tax deduction for the lease rentals and other running costs e.g. fuel, registration, insurance & servicing.
- Where the employer is registered for GST, they should be able to claim an input tax credit on the GST paid on the lease payments.
- Provides cash savings for employees.
- Employee has the ability to retain use of the motor vehicle even if they change employer.
- More than one vehicle can be leased.
- Stamp duty and GST are generally payable under leases.
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