Revolution Finance Share Some Advice On Vehicle Finance For The Self-Employed.
Announcement posted by Revolution Finance 17 Sep 2015
A number of vehicle finance solutions are available to self-employed applicants, however determining the right solution for you and your business will require some research. With this in mind, we have put together a brief fact sheet to help you make an informed decision.
Types of Finance For The Self-Employed.
1. Chattel Mortgage.
Under a Chattel Mortgage the lender provides funds to the customer to purchase a vehicle, and the customer takes ownership of the vehicle (chattel) at the time of purchase. The lender then takes security over the vehicle in the form of a mortgage, by registering their interest over it with the PPSR. Once the contract is completed, the security interest is removed giving the customer clear title to the vehicle.
2. Commercial Hire Purchase (CHP)
Under a Commercial Hire Purchase arrangement the lender will purchase the car on behalf of the client, and then hire it back to them over a set period of time (the term). The client has the use of the vehicle for the term of the contract but is not the owner of the vehicle (the asset will stay off the company’s balance sheet). The client takes ownership of the car at the end of the contract term when the total price of the vehicle (minus any residual) and the interest charges have been paid in full.
3. Finance Lease
Under a Finance Lease the lender agrees to purchase the vehicle on behalf of the customer, who then leases the vehicle back from the lender and pays a fixed monthly rental for the term of the lease. At the end of the lease the customer can either pay a residual value (final instalment) on the lease and take ownership of the car, trade it in or re-finance the residual and continue the lease.
Which is right for you?
Deciding on the right financing option for your business will depend largely on the tax implications and cash flow requirements.
With a Chattel Mortgage, GST can be claimed as an input credit on the purchase price of the vehicle, however no GST is charged on the monthly repayment or the contract balloon amount. Under a chattel mortgage, the client can claim the interest charges on the contract and depreciation up to the depreciation limit as a tax deduction.
With a Commercial Hire Purchase, GST is payable on the purchase price of the vehicle and also on all term charges (interest) and fees. These GST charges are payable upon settlement of the contract and can be added to the loan or paid up-front. Businesses can claim the GST paid on the purchase price of the vehicle up-front when they lodge their next BAS. Additionally, the GST charged on the interest and fees can be claimed back as input tax credit progressively over the life of the loan.
With a Finance Lease, GST is charged on the monthly lease rental and on the residual value at the end of the lease. Businesses can claim the GST contained in the lease rental and the residual value as an input credit on their next business activity statement. Where the amount financed is below the depreciation limit, the customer claims the lease rental as a tax deduction. Above the depreciation limit, interest charges on the lease and depreciation up to the value of the depreciation limit can be claimed.
No Financials? No Problem.
‘Low Doc’ or ‘Self-Declared’ options are available to suitable candidates. This simply involves the client signing a declaration of income and a detailed statement of the applicant’s assets and liabilities.
Call Us Today
We have helped thousands of business owners and sole traders grow their business through simple and affordable business car loans. If you want to speak to a business loan specialist, call Revolution Finance today on 1300 882 851 or visit our website for more details.