Auto finance advice for hospitality companies (and independent traders)
If you are in the hospice industry and looking to turn to deliveries or just need a set of wheels to pick things up from vendors, you might be wondering if you even qualify, especially if you’ve weathered the storms of lockdown. and reduced capacities. If you are a self-employed person, sole trader, or small business owner and plan to use your car for work more than 50% of the time, you may want to consider taking out an ABN car loan such as a movable hypothec or a hire purchase.
Mortgages and corporate car financing
Movable mortgages and hire purchase are ideal for companies or ABN holders who intend to use their car most of the time for business purposes. The two types of loans work the same but differ in where you own the car – a chattel mortgage means you own the property; has a hire purchase been entrusted to the lender. (It all depends on how you do your bookkeeping – ask your accountant for more information.)
Chattel mortgages allow you to claim GST on the purchase, interest paid on your repayments; or your lender claims it as part of a hire purchase. You can also claim tax benefits on depreciation up to the depreciation limit.
Chattel mortgages are a type of secured car loan, which means that banks and lenders will give you a lower interest rate than normal because the car is put as collateral.
Neutral cash flow
Savvy CEO and financial expert Bill Tsouvalas says a chattel mortgage is cash flow neutral too, which means you won’t need a deposit to get started. “You can borrow more than the cost of the car so you don’t have to pay for insurance or registration,” he says. “You can also claim the Instant Asset Tax Deduction, which makes it even better suited for businesses. “
Claim car expenses
If you buy a car for work, you should keep a logbook to show the tax office that you use your car 50% of the time or more for business purposes. “It can also save you money during tax season, as you will have to show the calculations to the tax office if you are claiming using the cents per kilometer method,” Tsouvalas said. For more tax advice, read our blog here.
SME recovery loans
The federal government has expanded its SME Recovery Loan Guarantee Scheme, which offers a guarantee of 80% of the loan amount and a repayment holiday of up to 24 months. Your business will need to prove that it has been financially affected by the COVID-19 lockdowns. You can apply for loans until 31st of December 2021.
If you’re in business and need a car, there are solutions in the form of mortgages and hire-purchase options. Remember to consult with your accountant to determine which product is best for you. “Also approach a broker instead of your bank,” says Tsouvalas. “More options mean more competition for your business – and you could save some money.”