Best business car finance options

Successful companies today, with big competitions and new market openings, have a great need for improving and expanding their business. Therefore, if a company wants to keep their status, they have to provide fast and quality service, as well as variety of services. Control of these factors, as well as independence from the other companies, are the key to every successful business. Why should you depend on other companies? Why would you consider a possibility of errors and/or latency because of factors that aren’t under the control of your company? Buying business vehicles today is not an option, but a need. 

 

Whether it is just one vehicle or a motor pool, with its benefits it pulls some expenses with it which can be reduced with right moves. These are the best business car finance options.

Car lease

A car lease (finance lease) is the most frequent choice of business car financing. The financier buys the vehicle for the company. The business owner is obliged to pay fixed monthly rental with fixed interest rate. At the end of the lease period the customer (business owner) can either pay the final installment and become the owner of the vehicle, or trade it in or re-finance residual and continue the lease. The benefits of this kind of financing are numerous. Contract is made with highly flexible terms which can vary from one to five years. Monthly lease rental and interest rate are always known in advance, so it offers no surprises at the end of the month. Provided the vehicle is used for business purposes, you will have some tax deduction and very reasonable interest rates because this is a way of secure financing.

Commercial hire purchase

This form of financing does not differ much from a car lease. The business owner makes a commercial hire purchase agreement with the financier about the vehicle. You have the same benefits as in car lease option, such as fixed monthly payments and interest rate. The difference is that at the end of the term you pay the residual value and become the owner of the car. This should be considered if you are sure you want to become owner of the vehicle, because you can’t lease the car after the term ends.

Chattel Mortgage 

  

Chattel mortgage resembles much of a classic car loan. This is a secured way of financing. The financier gives funds to the business owner for buying the vehicle. The business owner then gets the ownership of the vehicle but the financier makes a mortgage over it as a security for their loan. The contract that is made can be flexible from one to five years and, being that the monthly payment and interest rates are fixed, the cost is known in advance. With this kind of car financing you can even turn in a cash deposit up to 50% of the full car value. At the end of the term the charge is removed and you become an owner of the vehicle.

Novated lease

This is a three way agreement between the financier, the business owner and the employee. This way an employee enters the car lease with a financier where the business owner pays his obligations as long as the vehicle is used for company purposes. This is a great way of stimulating your workers. Employees under Novated lease agreement can choose which car they shall buy. If the employee, at any moment during this agreement, leaves the company or the lease agreement is finalized, all obligations by employer revert back to the employee. This way of financing brings numerous benefits to both the employer and the employee. Employer can provide a more attractive remuneration package, and therefore attract the employees they want. They have no residual risk or an excess vehicle if an employee leaves. This kind of financing also cuts down the administration time and costs comparing to business vehicles. As for the employee, he can choose the car he wants to buy; he controls the maintenance and care over the car, and generally has all the other benefits of car lease.

All of these options offer a great deal of advantages, respectively. If you are a business owner, you should check out all of these options before settling for the right one. It all depends on what you need the car for. One thing that is certain is that it is better to pay for your car pool little by little, than all at once, since companies that can provide that amount of cash at once are rare nowadays.

Loans for vehicles

Everybody who has a job and a family should also have a means of transportation. Of course, one can always use the public transport of his city, but having a car or a motor bike at your disposal whenever you want is always a preferable option. This, however, has its common drawback, and that is finance. Not many are able to just take out the cash and buy a vehicle on the spot, especially if they have an average monthly income and that is why people usually loan the money in order to purchase a vehicle. Loaning the money for a purchase of any sort carries that well known burden of “Interest debt”. However, in return, you are not paying for your item right away; actually you pay a smaller amount of money weekly or monthly depending on your income. There are specified car loans for this purposes like for example “Short Term Auto Loans” and “Long Term Auto Loans”.  

Short Term Auto Loans

These loans designed for the purchase of a new or used car and have payment terms of 12 up to 36 months and, as its name states; it has a shorter amount of time with lower interest rate for paying for your vehicle and getting that problem off your back. On the other hand you should not expect these monthly payments to be small. In other words, a customer with a bad credit rating may not find this option preferable to him or her since in that case the interest rate can be higher in order for them to have this kind of loan approved by the lender. A person with a good credit scores may opt for this loan, since his interest rate will be lower.

Long Term Auto Loans

These loans have payment terms longer than 36 months up to about 84 months and individual monthly payments are significantly smaller. The drawback of this option is that interest rate increases immensely and one will end up paying for a car a lot more than its original price.

There are other options to have a vehicle at your disposal for example “leasing” and this option will lend a weaker blow to financial situation. How does this work actually- what you need to do is find a financial institution that will lend you money for the car purchase and, after that, you repay the money that you have borrowed from that institution in monthly payments which are not as high as the ones that you would pay in the case of Auto Loans. The main difference in this case is that you are not the owner of the vehicle; instead you are a person who rents it from the lender since the financial institution which paid for it is the owner. Despite the ownership twist, this option has a lot of advantages:

1.       1. You get to use the vehicle during its best years.
2.       2. You do not have to worry about the increase when it comes to the interest rate.
3.     3. There is an option in which case you can pay more money in advance in order to decrease monthly installments.
4.       4. There are no additional payments after the agreement with financial institution has been reached.
5.       5. If you are satisfied with your vehicle there is an option of prolonged leasing period.
6.  

This can be a very good deal if one is not ready or does not have a luxury of affording a great cut-back in his or her budget to provide his or her family with a means of transportation.
 

There is another interesting way of buying a car or a motorbike it is called Residual Value or Balloon payment. It allows you to pay back the money that you have loaned for the vehicle in monthly payments that can be different and the amount of money that you pay monthly is all up to you under the condition that the amount of money that you promised to pay back over designated time remains the same. So if you borrow, for example, $40.000 and have 25% interest your total debt would be $50000. If your contract states that you need to repay this money in 5 years your monthly or weekly payments depend on you as long as you pay the full amount in 5 years time. This agreement reacquires some special conditions so it is not possible for everyone to make this kind of payment.