Finance is often overlooked when buying a Ute as often the exercise of choosing a Ute to purchase and then squeezing the best deal from a dealer is exhausting. It’s no wonder then that many purchasers fall over at the next important step. Finding the right finance for your purchase.
Yet the choice of finance can greatly affect the overall cost of owning your vehicle.
Like a lot of us the finance jargon, like Novated Lease, is confusing at times and the choices can seem overwhelming, making it difficult to break down the facts and get a clear and simple understanding of the cost. Finance brokers such as Stratton Finance have Car Loan Calculators to help in this area. .
In deciding which finance method is best for you or your business, it is important to fully understand the differences between the different funding options, like Novated Lease, Personal Loan etc
Hopefully we can make it a little easier to understand. This article aims to make the decision process easy, laying out the different types of finance options available to fleets.
The different types of finance are:
Car Loan
A Car Loan is a personal finance product where the financier lends the customer funds for the purchase of a vehicle, and secures the loan against that vehicle.
Commercial Hire purchase
A hire purchase is where you are given immediate use of the vehicle of your choice by the financier, in exchange for regular payments over a period of time (between one and five years). Once the final payment is made, you own the vehicle outright.
Hire purchase is ideal for businesses that wish to own the vehicle at the end of the term, or if you don’t know when the vehicle will be replaced.
Chattel Mortgage
In a Chattel Mortgage arrangement, the end user takes title to the vehicle immediately, as it is considered a cash sale. However, the financier takes a mortgage as security over the vehicle until repayments are made in full.
This type of loan best suits businesses that account on a cash basis with an annual turnover of less than $1m, as GST (goods and services tax) can be funded upfront and a full GST claim in the first BAS (business activity statement) cycle is permitted.
Novated Lease
A Novated Lease will suit any employee who wants to include a motor vehicle as part of their salary package, so long as their employer offers salary packaging as an option for employees. Companies such as https://www.strattonfinance.com.au/novated-lease are the best options.
Operating lease
An operating lease is an arrangement whereby the financier owns the vehicle and leases you the vehicle for one to five years in exchange for lease rental payments – basically like a long-term car hire. At the end of the lease you are required to return the vehicle to the financier.
Operating leases are an ideal option for businesses wanting the most current vehicle models – leasing them in this manner allows you to continually upgrade vehicles. Operating leases are also suitable when you don’t want to take the residual risk on the vehicle.
Finance Lease
Similar to an operating lease, a finance lease is a rental arrangement where the financier owns the vehicle, and you lease it from them for an agreed term. Essentially, the lease provides you with finance to acquire vehicles for your business.
This form of funding is suitable if you desire the flexibility of leasing, but also want the option to purchase the car at the end of the term.
Choosing your finance
When choosing which method of finance is right for you fleet, you need to ask yourself several questions about your business’ needs:
- Does your business wish to lease or have the employees have a Novated Lease or own (either upfront or at the end of the term) your company vehicles?
- Do you want to minimise the residual value or risk on the vehicle?
- Does your business account for GST on a cash or accrual basis?
Your answers to these questions can then be used to determine which finance method would provide you with the most benefits. Brokers like https://www.strattonfinance.com.au/ can prove invaluable help when making these decisions.
Hopefully this quick article has helped to simplify the financing process. Remember to get the best advice possible from financing professionals and make sure you don’t fall at the final hurdle. The finance decision is as important as what Ute to buy.
