What You Need To Consider Before Financing Vehicles For Your Business

Jacob Overs

Monday, 03 February 2020

Whether you’re running a mobile pet grooming service or opening a second food truck, chances are you’ll need to upgrade your vehicle at some point.

And while every business owner will agree that you have to spend money to make money, paying upfront is not always possible, or a smart use of capital. Equipment finance could be your answer.

Equipment Finance At A Glance…

Equipment finance can give your business that much-needed boost in order to grow without sacrificing free cash flow.

Equipment financing makes sense for lenders, too—in some cases, they’re able to use your asset/s as security in case you default on your loan, giving you a higher chance of finance approval, and potentially lower interest rates.

Equipment Finance For Business Cars

There are three main types of equipment finance for business cars. Here’s how each one works:

Equipment Loan

Also known as a chattel mortgage, an equipment loan is similar to taking out a residential mortgage. Your lender will provide you with funding to purchase a business car (or cars). The lender will then use your new car as collateral—or security—in case you default on your loan. If you fail to make repayments, your lender will be able to take the car from you, hence making you less of a risk in their eyes.

Hire-purchase Agreement:

A hire-purchase agreement involves your lender purchasing a car on your behalf for you to borrow. They’ll own the vehicle until you pay it off in full—in which case you’ll own it outright. Hire-purchase agreements are typically flexible—some lenders will let you put down a deposit to lower interest rates, while others may give you the ability to return the car during your repayment term if it’s no longer needed.

Lease Agreement

A lease agreement is similar to renting out a property. Once you’ve paid off the value of your car you’ll typically return it, though some lenders will allow you to extend the lease or buy the car at its depreciated price. The good thing about lease agreements is that often, your lender will be responsible for maintenance costs (similar to having bills included in rental payments). All you’ll have to worry about is making your repayments on time.

Other Considerations…

Some equipment finance structures provide the following benefits:

  • The ability to consistently upgrade your vehicles
  • The ability to prepay your repayments for tax benefits
  • Fast, flexible funding—receive cash in as little as 24 hours with Valiant

Also Ask Yourself:

  • How many cars do I need?
  • Do I want a specific model or brand of car?
  • How often will I upgrade my vehicle?
  • What features am I looking for in a vehicle?

These factors will determine how much you’ll end up borrowing and what finance structure will suit your business best.

Time is gold when taking care of a business. Let Valiant do the homework so that you can get a feel for your business car financing options in just minutes.

We compare business car finance from a diverse panel of over 80 Aussie lenders. Best of all, our quotes are free and no-obligation. See what’s out there by comparing your equipment finance options here.

Jacob is the Director of Sales here at Valiant. He has a wealth of experience in helping small business owners with their everyday finance needs, and is our go-to guru for all things working capital.

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