Using the Vehicle for Different Purposes
If you intend to use the car you purchase for personal purposes, rather than using it for your business, you will undoubtedly want to opt for a car loan with a fixed or variable rate or for a novated lease. On the other hand, if for the majority of your time you will use the vehicle for business travels and other similar aspects, you might want to opt for a chattel mortgage, a commercial hire purchase or a financial lease.
Fixed Rate Car Loan
This is one of the basic solutions you should be aware of when it comes to choosing the ideal financing method for buying a new vehicle. This type of product includes the lender (which can be the bank or other financial company you apply with) providing you with finance and using the vehicle as security for the loan.
Because of this, whenever you fail to keep up with the repayments or meet the exact terms and conditions printed on your contract, the bank will be able to seize your vehicle and regard you as a bad customer.
However, one of the advantage of this type of loan is that you will be able to establish the repayments within the limits of your budget, considering some basic factors such as the total amount that will be provided to you or the interest rate applied to your account.
Other benefits include the option of 100% finance, which will provide you with the chance of holding your cash for a longer period of time and using it for other purposes. Next, you can also use a deposit whenever you like, in order to make the repayments lower and choose the ideal car for you, because of the lack of limits.
Finally, with a fixed rate car loan, you will be able to drive your car for personal use and the interest rate will always guarantee the constant state of your repayment in every single moment of your loan’s term.
Variable Rate Car Loan
As in the case of the fixed rate, the lender will also use the car as security in most of the situations. Moreover, the repayments can be tailored according to your budget and you will benefit from a great number of advantages because of this, making the entire process a lot easier for you as an applicant.
In terms of limits, you will be able to choose any model you fancy, so if you were looking to buy the dream car you have always wanted, but the model is very expensive or is not part of the regulations of the other lenders, then this is most definitely the ideal solution for you.
Finally, you should know that the rate of your interest changes according to the market. As a consequence, if some low values are encountered on the interest rates provided by the market, then your rate and the repayments will also decrease, but this also applies if the rates go higher.
Novated Lease
This kind of car financing will be available for you if your employer provides salary packaging. The term novated lease is usually used to define an agreement between the lender, your employer and you. In this kind of situation, the employer will be the one to make payments on your behalf, with the money being deducted from your pre-tax income.
As for the repayments, you should know that you will have the opportunity to structure them in a flexible manner according the the total amount that will be granted to you, as well as the term of your loan and the interest rate applied to your account. Novated Leases are sometimes also known under the name of Salary Packaging.
Another important advantage provided to both the employer and employee is related to the fact that there is no required deposit and as a consequence you will be able to hold your cash and use it for other transactions which could be more important for you.
Furthermore, the regular lease payments you will need to make can also be lowered if you decide to include a residual amount in your loan. However, this means that you will have to pay more at the end of the actual period of your loan and you should be really careful before choosing such a solution.
As for the model of the car you are allowed to buy, the regulations are the same and you will be able to choose from basically any model you want. Furthermore, if you change your job you will be able to keep the vehicle you just bought. This last one is an aspect you will really want to take into consideration at any time, since the novated lease is one of the very few programs that provide you with such an opportunity.
Finally, you will also have some advantages related to the tax, because you will have to pay less from your income, since the payments are being made with the pre-tax money by the employer, which will work on your behalf.
Commercial Hire Purchase
This car financing solution is ideal for you especially if you are a customer who wants to become the full owner of the car, with full rights upon the usage of the vehicle at the end of the entire process. Moreover, if you intend to use it mostly for business use, you will also find some of the advantages provided useful to you and your financial situation.
As for the payments, what you should know is the fact that they are regular and depend on the term of your contract. In the end, when you have paid back the entire amount, you will be granted with full ownership of the vehicle and you will be able to use it in any way you want.
Furthermore, you should also know that the repayments can be tailored within certain limits of your budget and this entire process can also depend on what is known under the name of balloon, a term which defines a residual or a final installment. Furthermore, you will also be provided with the opportunity of using the GST refund in order to make a better contribution for the future aspects and payments of your loan. With the Commercial Hire Purchase, you will also reduce the amount financed to you, as well as the level of interest you will be required to pay during the duration of your loan.
When it comes to the advantages, you will be able to opt for a deposit if you want your repayments to be lowered down or alternatively use the balloon method. The interest rate for this type of car finance is always fixed and, as a consequence, you will always know the exact amount of your repayments throughout the entire duration of your loan. And this is not all. Your contract will be a very flexible one and simple to understand at the same time and you will have the opportunity to opt for a term between 12 and 60 months.
On the other hand, there are also some possible tax implications related to the use of a Commercial Hire Purchase you will most definitely need to be aware about before signing a contract with your favourite financial institution for a program like this one. First of all, if you are GST member, you will sometimes be able to claim the GST as a lump sum applied to the total price for the purchase of your car.
Next, you will be provided with the possibility of managing your GST and limit its impact, which is unfortunately not payable using the balloon or the individual repayments method. And finally, because of the fact that you will be able to claim deprecation, the costs and the interest and your business income might increase.
Chattel Mortgage
This type of car loan was especially designed for the customers who intend to use the vehicle for business purposes in most of the time. In most of the cases, this type of loan is regarded as a cash sale, because after the term has passed, you will become the full owner of the car. However, security measures will be taken until you pay the entire amount back and have the mortgage removed from your account.
As in the case of other similar types of car loans, you will also be able to use a deposit if you want to benefit from lower repayments, as well as the traditional balloon method for the same purpose. Furthermore, the rate of the interest you will need to pay will remain fixed and, as a consequence, the repayments will also keep at a constant pace during every moment of the length of your contract.
Finally, there are also some tax implications, which are very similar to the ones that apply to the commercial hire purchase services provided by most of the financial institutions. What is different though is related to the ability of deprecation claiming, as well as the costs for running and protecting the income for your business.
Financial Lease
Last but not least, you might also want to take into consideration the possible benefits provided to you by this car finance solution. The financial lease is a particular type of lease usually designed for people who are intending to use the vehicle for business purposes.
The repayments that will be applied to your account will be fixed for the entire duration of your lease and you will therefore be provided with the necessary level of security and always be able to establish some accurate limits for your budget. In order to add even more flexibility to your account, you will be provided with a great number of options when the contract expires. For example, you will have the opportunity to refinance the cost for your car or pay for a residual value.
The financial lease method, also known under the name of car lease, will also give you the chance of using a residual in order to lower the level of your repayments, while the interest rate remains the same for the entire duration of your contract. As a consequence, the lease payments will also be fixed and you will always know how much you need to pay every month and therefore be able to manage your income better.
The contract is a very flexible one and understanding it will never be a problem. As for the period of the loan, you will be the one to decide what is best for you, being provided with the opportunity of choosing between 1 to 5 years.
In terms of tax implication, there is the inclusion of the GST portion of the total price you have to pay for the purchase of your car. In addition to this, there is also the ability of reclaiming the running costs and leasing your payments against the income and profit obtained by your business.
Conclusion
Finally, you should know that the information presented to you in the above lines only represents a guide and not an expert financial advice. You will be able to use the information in order to get a clear vision related to the several options you will have to choose from when it comes to obtaining financing for your car.
You should be really careful and do some basic research when it comes to choosing the financial institution to collaborate with and never be afraid to look for some professional advice if you want to make sure that the decision you make is the right one for you or your business.
