Skip to main navigation Skip to main content

3 reasons to finance a truck for your small trade business

If you’re in the truck or trade industry, it’s highly likely your business revolves around your vehicle. This can be a serious initial outlay of cash, so if you’re starting your business from scratch financing your vehicle may be a more feasible way to enter into the market. There are a range of finance options to suit your needs as a small business and Truck Assist have listed the three reasons why you should consider financing your vehicle.

Reason 1: There is a huge range of truck finance options 

If you opt to finance your truck rather than buy, you’ll be spoilt for choice! There are several options, each with slightly different terms to consider in order to find a business vehicle finance option that is best suited to your small business situation.

Finance Lease

A finance lease is where the finance lender retains ownership of the vehicle while you enjoy the benefits of ownership of a commercial vehicle. Essentially, the lender purchases the vehicle on your behalf and then leases it back to you. You make monthly lease payments until the term is up, where you can either pay off the remaining value on the lease and take full ownership of the car, trade the car in or pursue other truck finance options.

Commercial Hire Purchase

This type of business vehicle finance involves you hiring a truck from a lender for an agreed period. After making fixed monthly repayments over this period, you may take ownership of the vehicle at the end of the term, provided you have paid off the loan in full.

Chattel Mortgage

Simply, a chattel mortgage sees a financier lending you the capital you need to purchase a vehicle. You immediately take ownership of the vehicle, but the lender takes out a mortgage on the vehicle as security on the loan. Once the contract is over, the mortgage is removed.

Novated Lease

For small businesses with employees, knowledge of this truck finance option is essential. It allows employees to use their pre-tax income to lease a vehicle. The employer is responsible for arranging for the lease payments to be taken directly from the employee's salary, meaning they can reduce their taxable income.

Business Loan

A standard business loan is certainly another option to fund the purchase of a truck. You have a range of options available with typical small business finance, including a line of credit and a basic term loan.

Reason 2: You can reap numerous business tax benefits 

Depending on how much you spend and the business vehicle finance option you select, your business may receive tax benefits. For example, if you operate a business with an annual turnover of less than $10 million, an immediate tax deduction can be claimed on a vehicle under $20,000.

However, how much of the company vehicle you can claim as a tax deduction varies greatly depending on which truck finance option you choose. For example, a chattel mortgage will allow you to claim interest charges and the depreciation on the vehicle as a tax deduction, while under a finance lease you can claim a deduction for the entire lease. Make sure you ask these questions of your financier, so that you can leverage these business tax benefits.

Reason 3: Business vehicle finance is flexible

Not only does ‘flexible’ pertain to the fact that there are a wide range of finance options available to you, but most of those options enable you to select a repayment schedule that suits your small business needs and budget.

The length of the term associated with your business vehicle finance is important because it can influence how much money you must pay in order to gain ownership or, on the other hand, for loans that give you ownership up-front, the term is also important to consider for forward planning of payments.

Most truck finance options function with terms of between 12 months and 5 years, but if it’s extra flexibility that you need, then you’ll want to have a finance lease right at the top of your consideration list. This option doesn’t give you equity in the truck, but you can trade-in your truck at the end of a lease for a new vehicle and have the options to purchase the truck or walk away entirely. Most of the business tax benefits are available to you through a finance lease also.

Once you’ve acquired your business’s most precious asset, you will need to protect it. Having insurance for your single or convoy of trucks is incredibly important for the longevity of your small business in the tough times it will undoubtedly experience in its infancy. Truck Assist’s Drive Pack Truck Insurance package is a well thought out solution for small businesses who are seeking to protect their company vehicle. Get a quote online to see how we can have your back on the road.  

This blog is a guide only and does not contain a definitive list of regulatory requirements which you must meet as a business owner. Businesses are required to comply with all laws, regulations and codes of practice by identifying their risks, and develop and implement control measures tailored to their circumstances, and you must seek independent advice to assess your circumstances.