Quick answer
A business car loan finances a car used mainly for business, such as a sales rep's car, a real estate agent's vehicle or a director's car that does client visits. The loan sits with the business or the owner in their business capacity. It can be secured against the car itself, unsecured, or backed by property. Only the business-use share of running costs and interest is generally deductible, so keep a logbook and check the tax side with your accountant.
Key points
- For cars used mainly for business, held by the business or a sole trader.
- Secured against the car, unsecured, or backed by property.
- Business-use percentage drives the tax treatment: keep a logbook.
- Dealer finance is convenient but worth comparing.
- Common buyers
- Sales reps, agents, consultants, tradespeople
- Structures
- Car-secured, unsecured, property-backed
- Tax key
- Business-use percentage and logbook
- Purpose
- Business purposes only
For plenty of businesses, the car is the office. Agents showing homes, reps covering a territory, consultants visiting clients, owners running between two shops. A business car loan funds that car through the business, so the cost sits where the income is earned and the tax treatment follows the business use.
What counts as a business car?
A car used mainly to earn business income. Common examples:
- A sales rep’s or account manager’s car.
- A real estate agent’s car used for inspections and appraisals.
- A consultant’s or tradesperson’s car for client visits.
- A pool car shared by staff.
- A director’s car used substantially for business travel.
If the car is mostly for school runs and weekends, it isn’t a business car, and a business loan isn’t the right fit. If you’re torn between the two, our guide to personal loans versus business loans works through it.
How can a business car be funded?
| Structure | How it works | Good for |
|---|---|---|
| Car-secured finance | The car is security, registered on the PPSR | Newer cars from dealers |
| Unsecured business loan | Sized on turnover, no security over the car | Older or private-sale cars |
| Property-backed loan | Equity in property is the security | Several vehicles, or bundled with other purchases |
| Novated lease | Employer and employee arrangement | Employees salary packaging a car |
Novated leases are an employment arrangement rather than business borrowing, so they’re outside what we do. For owners and businesses buying cars to use in the business, the first three cover almost every case.
How does business use affect tax?
The general principle is that you can claim the business-use share of running costs, depreciation and interest. To support that, keep a logbook for a continuous 12-week period. Things to raise with your accountant before buying:
- Who should own the car: the company, the trust, or you as a sole trader.
- Fringe benefits tax if an employee or director uses the car privately.
- The car limit on depreciation for expensive vehicles.
- GST credits if the business is registered.
- Electric car FBT exemption: eligible battery electric cars below the luxury car tax threshold for fuel-efficient vehicles, first used on or after 1 July 2022, can be exempt from FBT when provided to employees. See electric vehicle finance.
New or used?
New cars have warranties, predictable costs and are easy to finance against themselves. Used cars cost less, lose value more slowly from here, and suit businesses that put on big kilometres. Our guide to buying a new or used business vehicle compares the two with real-world considerations.
Illustrative example. A Wollongong mortgage broker drives about 30,000 kilometres a year visiting clients. She’s choosing between a new mid-size hybrid at about $52,000 and a two-year-old version of the same car at $38,000. The used car keeps most of the warranty, costs $14,000 less to borrow and her logbook shows around 85 per cent business use either way. She takes the used car and funds it with a short business loan so it’s paid off well before she’d want to change.
Before you sign anything
- Run a PPSR search on any used car (it costs a couple of dollars).
- Ask for the total cost of finance in dollars, including fees and any balloon.
- Check whether a balloon payment leaves you owing more than the car will be worth.
- Look at the repayment against your slowest month, not your best.
What does a business car really cost to run?
The repayment is only part of what a business car costs. Before choosing a car, and an amount to borrow, add up a realistic year of running costs:
| Cost | Questions to ask |
|---|---|
| Fuel or charging | How many kilometres a year, at today’s prices? |
| Servicing and tyres | What does the manufacturer’s schedule cost? |
| Insurance | Comprehensive cover for business use, with any named drivers? |
| Registration | Your state’s rego and compulsory third-party cost |
| Tolls and parking | Especially for city-based roles |
| Depreciation | What will it be worth when you change it? |
A cheaper car with low running costs can work out far better than a dearer one with a lower repayment and a big balloon. For high-kilometre roles, running costs can rival the finance cost, which is one reason many businesses look closely at hybrids and electric vehicles.
Once you know the full cost, check it against the income the car supports. A rep’s car that lets them see two more clients a day is easy to justify. A bigger car than the job needs is a cost the business carries every month for years.
Need a car for the business?
If the car helps you earn, let’s fund it through the business. Asking us costs nothing and doesn’t touch your credit file; a credit check is only raised once you choose to go ahead. We don’t blast your details out to a crowd of lenders. A real person looks at the car, the business and how you’ll use it, then calls you with options.
Please be accurate on the form about the car, its price, whether it’s new or used and how much it’ll be used for work. Start your business car enquiry.
Frequently asked questions
What's the difference between a business car loan and a personal car loan?
A business car loan is for a vehicle used mainly to earn business income, and it's assessed on the business. A personal car loan is for private use and falls under consumer credit rules. Using a personal loan for a work car can complicate tax claims and your personal borrowing capacity.
Do I need an ABN for a business car loan?
Generally yes, since the loan is for business purposes. Sole traders borrow under their own name with their ABN; companies borrow in the company name with directors guaranteeing.
Can I get a business car loan for a used car from a private seller?
Yes, though some car-secured financiers restrict private sales or older cars. An unsecured business loan avoids that. Always run a PPSR search to check the car isn't carrying someone else's finance or recorded as written off.
What about fringe benefits tax if an employee uses the car?
If an employee, including a director of a company, has private use of a business car, fringe benefits tax may apply. Eligible electric cars can be exempt. Your accountant can work out the best structure before you buy.
Should I take the dealer's finance offer?
It's convenient, but compare the total cost in dollars with at least one other option. Dealer offers can bundle add-ons you don't need, and a low-repayment offer with a big balloon can cost more overall.