3 considerations for small trade businesses looking to finance a truck

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, which we consider below.

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

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: There are potential tax benefits

Depending on how much is spent and the business vehicle finance option selected, some business may receive tax benefits.  

The amount that can be claimed as a tax deduction varies greatly depending on the truck finance option that is chosen. For example, a chattel mortgage might allow you to claim interest charges and the depreciation on the vehicle as a tax deduction, while under a finance lease you could 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. Also, contact a tax advisor if you would like to find out more about the tax benefits you may be eligible for.

Reason 3: Business vehicle finance can be 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 allow you to work out repayment schedules to match your 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.

Protect yourself with Truck Assist

Once you’ve acquired your business’ most precious asset, you might wish to protect it. Having insurance for your single or convoy of trucks can be helpful if something unexpected arises, which is a real possibility for any business, including one in its infancy. 

Truck Assist’s Drive Pack Truck Insurance package is a well thought out solution for small businesses seeking to protect their business’ vehicle. Get a quote online to see how we can have your back on the road.   Please note appropriate insurance cover will depend on your business, so please consider whether Truck Assist’s product is right for you and your business needs and consult the relevant PDS and TMD.

This blog is a general information 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. Truck Assist bears no responsibility, and shall not be held liable, for any loss, damage or injury arising directly or indirectly from your use of or reliance on the information in this article.