Car Loans for Personal Use
There are two types of car loans available for personal use; secured or unsecured (see descriptions below).
For either loan it is repaid over a period of up to 7 years.
Scheduled weekly, fortnightly or monthly payments can be made by direct debit, cheque, BPAY, internet banking, direct payroll, and cash where applicable.
Insurance, warranty and loan protection can be added to the car loan.
A deposit is not required on most cases, but may assist in your approval chances.
The loan has a fixed interest rate, ie the interest is calculated on the unpaid balance daily, just like a home loan. Extra or additional payments will obviously reduce the outstanding balance and therefore reduce the interest charges. This can have the effect of shortening the term and reduce the overall cost of the loan.
Although it is a personal use loan, depreciation and interest charges could be tax effective claims if the car/boat is for business or work related usage.
Most personal use loans in Australia for cars, boats, bikes etc are secured.
As an individual you are borrowing money to purchase a tangible item like a vehicle or boat which will be used as security for the loan. When you trade-in or sell you must then payout your car loan, and get a new loan if you require money to buy something else.
Secured loans generally have a lower interest rate than unsecured loans.
This is a very versatile loan, as it can be used for nearly any purpose including debt consolidation, for a holiday, weddings, or even cars & boats that do not qualify for the secured loans above. There is no security required for this type of loan, thus interest rates are slightly higher than secured loans.
Note: This product is not available in some areas.
There are a range of finance solutions for when your business needs vehicle finance. Asset Purchase, Chattel Mortgage or Novated Leases, more information is below to help you decide on which product may be suitable for you.
Asset Purchase is a rental agreement, but differs from a finance lease in that the goods automatically become yours once all terms of the agreement have been completed. Ownership of equipment rests with the lender until the final payment is made, however for tax purposes you may be able to claim equipment depreciation and interest paid, against your business income. (confirm with your accountant)
You also have the option of including an upfront deposit or trade-in to reduce your rental commitment, while a balloon payment may also be set at the end of the term (much like a lease residual) to acknowledge the equipment's end value. Alternatively, you may choose to structure your rentals to clear the debt in full over the term of your agreement.
Chattel Mortgage is essentially a charge over goods to be financed. This allows businesses who operate under a 'cash accounting' basis to claim the full input tax credit from GST incurred expenses immediately.
Loan structures can be tailor made on a similar basis to Finance Lease & Asset Purchase facilities.
A Finance Lease is a form of rental agreement under which you lease your nominated asset for an agreed term and rental amount. A residual value is set to reflect the equipment's value at the end of the term.
The goods are owned by the lender, but the lease rentals are tax deductible to you, as long as the goods are used in connection with producing assessable income.
At the end of the Lease you can make an offer to purchase the equipment from the lender, trade it in on a replacement, return it, or extend the lease for a further term.
Company Cars & Novated Car Leasing
Novated Leases have become a popular alternative for businesses wishing to provide their employees with motor vehicles.
A Novated Lease is effectively an agreement between the employee (a lessee), their employer and the finance company (the lessor).
It operates by creating a Finance Lease Agreement (refer to the Lease Agreement Section on this page) between the employee and the lender. A Novation Agreement is then entered between all parties, which transfers responsibility for the lease rental commitment to the employer during the lessee's period of employment. On the employee leaving employment, the novation ends, with ongoing responsibility for the lease returning to the employee.
As motor vehicles acquired this way are leased by the employee, there are benefits for your business and your employee. These could include:
- Potential to remove the vehicle fleet from your balance sheet.
- Eliminating administration and maintenance costs involved in managing a fleet.
- The ability to negotiate payment of vehicle running costs with your employees.
- Freedom for your employees to choose their motor vehicle while enjoying the benefits of a company car.
- No on-going company responsibility for the vehicle should an employee leave.
All of the above should be confirmed with your accountant prior to undertaking Novated Leasing.