How To Finance Your Car For A Business

How To Finance Your Car For A Business

Depending on what type of business you run, buying a car can be an integral part of running a successful company.

They can help you get to client meetings, deliver products to your customers and assist you with a variety of operational tasks. While there’s always the option to lease, buying a company car might be the best option for you.

If you’ve financed a personal vehicle in the past, getting a business car loan for your company is very similar. In our comprehensive guide, we’ll give you a step-by-step breakdown on how to apply for a business car loan, the benefits of financing and more. Let’s take your business to the next level, one car at a time!

close up of man getting out of a car from his business car loan.

Why You Should Finance Your Vehicle

Similarly to personal cars, many people prefer to finance their business cars because of the benefit of owning it afterwards.

This is important if you plan on having your vehicle for a long time, especially if it plays a crucial part in the success of your business. Even if you decide to resell it down the road, all that equity is yours to take advantage of and invest back into your business for other upgrades.

Getting a business car loan also gives entrepreneurs more financial flexibility. When you’re buying a car, it’s not easy cashing out thousands of dollars upfront, especially if you need a fleet of cars. Instead of losing a charge portion of your work savings all at once, financing gives business owners the flexibility to pay back their loans in monthly installments over a fixed period. This payment plan is a lot more flexible and allows business owners to stretch out their money and spend it on other important business items.

Another major benefit to financing is the contractual freedom you have with your car. The only major stipulation with business car loans is making your monthly payments on time. So long as you do that, you have nothing else to worry about. For example, unlike leasing, business owners who finance have no mileage limitations on their car.

Depending on what type of business you own and the purpose of the vehicle, if you or your employees plan to drive long distances, financing gives you the flexibility to do that. This is also true if you expect vehicles to experience a lot of wear and tear while on the job. With leasing, businesses are pressured to keep their vehicle in good shape for the entire lease period, and depending on the nature of the job and what the car is expected to do, the strict upkeep might be unrealistic, which is why many prefer financing.

Financing is also great if you want to customize your vehicle. It’s not uncommon for business owners to want to brand their cars to help them stand out and generate brand awareness while they’re out on the road. Because financed vehicles will eventually become fully owned by the business owner, they have the flexibility to customize their vehicle the way they see fit — something that’s not possible through leasing.

Overall, financing gives business owners the flexibility to do what they want with their company vehicle without having to worry about any outside restrictions. On top of that, there are no usage limitations on business car loans. This means you can take one out no matter what their business purpose might be. Whether you’re looking for a vehicle to make customer deliveries with or commuter car for your employees, a company can get a business car loan no matter what their needs are.

Leasing Your Car For Business

Before you head out and apply for a business car loan, it’s only fair to look into the other viable option as well — leasing. While there are many benefits to financing, leasing might be the better option for you depending on what your business needs are at the time. Leasing is a great short term strategy, especially for those who simply want to test the impact having a car will have for their business. Test driving a vehicle over a lease term can help business owners decide whether they want to fully commit to a car purchase or not.

Those who enter a lease contract pay a monthly fee to borrow the vehicle over a fixed time period. Depending on the leasing company you go with, you may not require a downpayment to initiate your lease term which is great for cost saving purposes. Once your lease term is up, you return the vehicle and are given two options — pay the rest of the balance on the vehicle to own it or pick out another car and restart the process all over again. Those who lease, typically go with the latter option because it gives them the chance to drive a newer model.

While all this might sound great, starting new lease contracts every couple years might be costly over time. While monthly payments are typically lower than business car loan payments, those who lease pay to borrow the car but not own it. Depending on who you ask, some people feel like that’s throwing money away for something that will never be theirs. If this is where you stand on the debate, financing maybe your go-to option as fulfilled car loan payments will eventually give you ownership of the vehicle.

With that said, there are some solid perks to leasing that business owners should be aware of. For one, if you love getting an upgrade once in a while, once your lease term is up you have the opportunity to enter into another lease agreement with a new vehicle. Depending on the industry that you work in, this can be helpful if you have to keep up with certain appearances. In addition to that, lease contracts also cover the cost of typical maintenance work. For small business owners this is one less expense loss their plate.

Whether you decide to lease or finance, it’s important to note that there are certain tax deductables you can make on each of them. If you’re unsure which option will benefit you the most come tax season, consult your accountant for some guidance and they can help point you in the right direction.

Risks With Financing Your Business Vehicle

Much like personal car loans, business vehicles are also at risk of being repossessed by the lender if the business under the loan contract becomes delinquent on monthly payments. While having your car repossessed under any circumstance can be very stressful, it can be more so for entrepreneurs that rely heavily on their vehicles to conduct their business.

Since there’s potentially a lot more at stake for business owners, it’s important that you take time to crunch the numbers and make sure you’re able to afford a business car loan.
Especially if you need a fleet of cars, make sure you’re not taking more than you can handle financially. When you plan ahead, you never have to worry about compromising your business or services.

Pro Tip: Owning and operating a business is an exciting endeavour, but sometimes it comes with low periods and unexpected losses that we’re unable to predict. While it’s always advised to have some extra money saved up for the unexpected highs and lows of the business world, if you find yourself in a bad financial spot, don’t panic just yet!

The moment you realize you might not be able to afford your monthly car loan payments, it’s time to start reorganizing your finances. Try to balance your budgets and see what you’re comfortable with paying going forward, or at least see what’s most feasible for you. As soon as you have that figured out, call your lender! Negotiate a modified repayment plan based on your new budget and in most cases (not all!), your lender will be able to accommodate.

If you’ve applied for a personal car loan in the past, you’ll be happy to hear that applying for a business car loan is very similar!

How To Finance Your Car For Business

If you’ve gotten a personal car loan in the past, you’ll be relieved to hear that getting a business car loan isn’t that different. Minus a few differences in the application process, going about getting a business car loan is almost the same.

After picking out the vehicle that would best suit your business needs, you should pick out a lender that offers competitive interest rates that work for you. The most popular options including going to a bank, credit union or subprime lender.

Once you apply and get approved by the lender of your choosing, you (the borrower) typically have to offer a substantial downpayment in order to initiate the agreement. The lender will then pay for the difference of the vehicle. Once you’re all set, the borrower and the lender decide on a loan repayment plan which needs to be paid back over a fixed time period. Once the consumer fulfills all their payments, they become the official proud owner of the vehicle which they can use for their business for years to come.

Applications Requirements For Your Car Loan

Application requirements will vary from lender to lender, but each applicant should be expected to put forward various business and personal documentation together. This will include business licenses, proof of ownership of the business, articles of incorporation or any formal partnership agreements. Other documents that lenders will want to see include bank statements, tax returns, business credit history as well as the personal credit history of the applicant being evaluated. Depending on the lender and how strict their application is, some applicants may be required to provide a business plan to show why them why you need the vehicles and for what purpose.

A big thing to keep in mind when applying for a business car loan is having to list yourself as a loan guarantor. This means you’ll be personally responsible for paying off the loan if your business goes under. Because of this, not only will you have to submit information for your business into your application, but you’ll also have to submit personal information as well.

Keeping this in mind, before you apply for a business car loan make sure your personal finances are all in order as well. Having a loan guarantor is required by most lenders. Some businesses with high credit scores can qualify for loans without them, but that’s a very small exception.

Now that you know how to finance your car for business, what are you waiting for! If you want a competitive edge in your industry, getting a company vehicle is probably the next crucial step to helping you get there. See how far your business will go with the help of some hot wheels!

Get Your Car Loan Approval

Related Articles

Apply for your Car Loan

Apply Now and Experience a Whole New Way to Buy a Car

Apply Now