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The best car loan finance option for entrepreneurs

by Tom Caesar

Starting a new business comes with unique and challenging obstacles at every turn. Whether you’re an experienced entrepreneur or new to the game of business ownership, it takes hard work and dedication to turn a fledgling idea into a profitable business. Finding a niche market, establishing your brand and keeping the business operational until a profit is turned are just some of the challenges entrepreneurs face from a business perspective. From a personal perspective, they can find themselves alone while dealing with the pressures of being the chief decision maker, rule maker and visionary, not to mention the stress of leaving the security of a job to pursue their own business interests.

For some entrepreneurs, organising the purchase of vehicles may be one of their major startup challenges. Whether it’s just one vehicle for themselves, or a whole fleet for their business needs, the costs associated have the potential to end their business before it even has a chance to get off the ground. But there is a way to purchase business vehicles without tying up a lot of startup capital.

Is your vehicle use mainly for business?

If more than 50% of your vehicle use is for business purposes, then a chattel mortgage is probably going to be the best option for you. A chattel mortgage gives entrepreneurs the best chance of having the vehicle they need without having to find a major lump sum payment. The structure of a chattel mortgage is very similar to a regular consumer car loan, but with several key differences:

  • A car finance provider releases funds to an entrepreneur to purchase a vehicle
  • The entrepreneur makes periodical repayments for the life of the loan
  • The lender will register their security interest in the vehicle on the Personal Property Security Register (PPSR)
  • The entrepreneur will enjoy full ownership rights from the start of the loan period
  • At the end of the loan period the entrepreneur will take full and clear ownership of the vehicle

Apart from the taxation benefits that are explained below, there are several other benefits to using a chattel mortgage for your business vehicles purchases:

  • The vehicle is used as security, so the interest rates will be lower than other types of unsecured loans.
  • You can choose to have a final balloon payment option, which means you can lower your periodical repayments, but have a lump sum owing at the end of the loan. This will be set by your lender, but it could be anywhere up to 60% of the vehicle’s value.
  • Because cashflow is vital to the life of a startup business, especially in the early years, you can negotiate the repayment amounts to coincide with profit increases year on year. So for a four year loan, you may pay a nominal amount in year one, followed by incremental increases in each of the following three years.
  • You can borrow 100% of the purchase price, or if you prefer, trade in a vehicle you already own or use surplus cash to reduce the loan amount.
  • To alleviate initial business outlay costs even further, you can roll the  insurance, ongoing maintenance and other essential expenses into the loan amount.

What are the tax benefits of a chattel mortgage?

For entrepreneurs it can seem like an eternity before they start withdrawing profits from the business for themselves. In the early years it feels as though every spare cent gets rolled back into growing the business, and there can be some anxious moments trying to find the funds to pay bills and wages while marketing the business at the same time.

Buying your vehicle using a chattel mortgage can give your business an initial, and ongoing financial boost due to the tax advantages that are available to you as a business owner.

  • Because you take ownership of the vehicle from the moment the loan period begins, if you are registered to pay GST on a cash accounting system, you can claim the GST you’ve paid on the vehicle in your next Business Activity Statement (BAS).
  • You can claim vehicle depreciation and the interest portion of your loan repayments in your BAS because the vehicle is used predominantly for business purposes.

These two benefits alone can save you a lot of money, especially in those early years where funds are tight and you need every cent to grow the business.

What happens at the end of the chattel mortgage loan period?

Once you’ve made your final loan repayment, and any agreed balloon payment, the vehicle is removed from the PPSR and it’s yours to do with whatever you please. For example, you could start using it as the family vehicle and take out another chattel mortgage to upgrade your company vehicle. Or you could sell it to reduce the loan required for your next chattel mortgage. You could in turn lease it out to another company to add another revenue stream to your business, or simply continue using it as your company car. Because you now have clear ownership, the choice is yours to make.


Entrepreneurs need to take advantage of every benefit they can to get their business ideas off the ground and profitable. This has knock-on effects for business growth, paying staff and achieving your lofty but realistic business goals. So it makes sense to get the best deal possible on vehicles if your business relies on them, and for entrepreneurs starting a new business, a chattel mortgage is likely to be the best option.

image: Shutterstock

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