Learn key steps, benefits, and tips for financing your business vehicle. Explore your options with Metro Finance.
Car Loan Process Explained - Things to know before applying for a business car loan
A car is an important tool of trade, just like any other piece of business equipment – whether it’s to facilitate travel, move equipment, or incentivise staff. Whatever a business vehicle might be used for, it’s important to understand the types of finance options are available, and what they will mean for your business over time.
In this blog we’ll take a look at how to get finance for a car, along with what the application process might look like for you.
What is a Business Car Loan?
Put simply, a business car loan is a form of finance that offers a range of businesses, from small enterprises to well-established corporations, the ability to purchase a new or used vehicle to perform a variety of business functions.
Business car loans can range with a loan value between $10,000-$500,000 with terms typically ranging from 2-5 years.
Key Benefits of Business Car Loans
While each business’s needs are unique, vehicle finance can unlock a range of benefits, including:
- Tax benefits: as a business tool of trade, you may be able to claim interest and other costs as a tax deduction.
- Cashflow management:from reducing the initial outlay of the full purchase price of the vehicle, to establishing regular repayments, a loan can help keep cashflow steady and money within the business.
- Access to better vehicle options: aside from enabling greater purchasing power through a loan, your lender might even be able to offer you fleet discounts or instant access to popular vehicle models that are waitlisted or in high-demand.
- Balloon payment: by establishing an agreed balloon payment at the end of the loan term, you may be able to reduce your monthly repayments.
Step-by-Step Guide to the Car Loan Process
While the loan application process can appear daunting, through careful planning and diligent research you can secure the funding you need. Here are some handy tips to follow in your application journey:
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Assess Your Business Needs
It sounds simple, but it’s very important to first understand your business needs in terms of acquiring a vehicle – this should include the type of vehicle that you think you’ll need, as well as what your current budget is.
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Research Loan Options
Choosing the right loan and understanding interest and repayment terms, is dependent on doing your research and shopping around to get the best deal. Talk to a Metro broker to find out how to get vehicle financing and what options from Metro Finance might be right for you.
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Gather Required Documentation
Whichever option you choose, you will need to show evidence that your business can make regular repayments and is financially able to take out a loan. Before you submit a loan application, either directly with a financier or via a broker, you will need to have a selection of up-to-date documents, including financial statements, proof of income and business operations; so have them ready when you start your application.
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Apply for a Loan
Now that you’ve established a business case for a vehicle purchase, picked a loan package that is right for you and have the required documentation ready, it’s time to apply for the loan itself.
Ask questions with your broker or the financier, and make sure you understand everything that is required of the business to maintain the loan. It is incumbent on you to answer truthfully and accurately to all application questions.
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Approval and Vehicle Purchase
Now that your loan is submitted you just have to wait for approval from the lender – approval timelines should be communicated to you at the time of applying. Once approved (hooray!), it’s time to purchase your chosen vehicle, either via a dealership, a broker, or private sale.
Just as in shopping around to get the best finance rate, it also pays to research vehicle options and ask for a better deal. Remember, any money saved at the time of purchase can reduce the loan amount and any future repayments, so don’t be afraid to haggle!
Things to Consider Before Applying for a Car Loan
While the loan application process can appear daunting, through careful planning and diligent research you can secure the funding you need. Here are some handy tips to follow in your application journey:
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Make sure your financials are current and up-to-date
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Make sure your business has the funds to cover repayments and any fees
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Maintain a good credit history – you can do this by making sure you pay your debts on time
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Look at all finance options. If a business car loan doesn’t suit your business needs there are other options, such as vehicle leasing
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Ask questions! If you’re working with a broker they will be able to guide you through the process and answer any questions you may have
Alternatives to Traditional Car Loans
Common Mistakes to Avoid When Applying for a Car Loan
While there is no one-size-fits-all approach when it comes to applying for a business car loan, there are some common mistakes to avoid to ensure the best outcome:
1. Underestimating additional costs
A car is a business asset that needs regular up-keep, so it’s important to factor in things like insurance and maintenance to get the full picture of what it will cost your business for the life of the loan.
2. Missing deadlines for repayments
Aside from potentially attracting late fees, this can also affect your future credit rating, so make sure you have the funds in place to meet the repayment schedule.
3. Not anticipating business needs
It sounds simple, but understanding your business needs now and into the future will help determine if vehicle finance is right for you. If you only have a need for a vehicle in the short-term, it may be worth looking at alternative options, such as a short-term rental.
Contact Metro Finance for Expert Help
Want to know more? Chat with a Metro expert or one of our friendly brokers to learn more about the type of finance products we offer, and how we can create a tailored financial option to suit your needs.
Secured Car Loans - Frequently Asked Questions
Can I get a secured car loan with a poor credit score?
Contact your asset finance broker who can assist you with applying a commercial finance loan or alternatively you are welcome to contact Metro who can provide you with a list of accredited Metro brokers who you can get in touch to arrange an application.
What happens if I can't make the payments on my secured car loan?
If you’re unable to make payments on your secured car loan, it’s important to act quickly. Since your car serves as collateral for the loan, the lender has the right to take back the car and sell it to recover the money you owe.
Before things get to that stage, many lenders are willing to work with you if you’re facing financial difficulties. If you’re struggling to make payments, it’s a good idea to contact your lender as soon as possible to discuss options like adjusting your payment plan or temporarily pausing payments (hardship arrangements). Ignoring the issue could lead to penalty fees and damage to your credit score, making future borrowing more difficult.
Can I use a secured car loan to buy a used car?
While the exact timeframe can vary depending on various factors, including the completeness of the application and the complexity of the financing request, we strive to provide a decision as quickly as possible.
