Business Vehicle Finance
Getting a business vehicle, whether big or small, comes with a financial obligation. However, this financial obligation can sometimes be huge and considerable, especially when making an outright purchase. In turn, this might cause a financial strain on a business. Even more, in some cases, it can make it impossible for the company to make the necessary purchases.
That’s where a business vehicle finance comes in. It allows you to obtain the purchase price from a financer. In turn, you can then make a monthly payment based on the terms of the agreement over a period.
This is extremely useful as it allows you to make a purchase regardless of your financial situation. Even more, you can make repayment based on your convenience while diverting the funds into other essential business areas.
However, as a business, the effectiveness of this financing option depends mostly on choosing the right financer and your borrowing power. As such, it is vital to select the right financer. This is also important to avoid any future legal issues or disruption to your financial stability. As such, ensure you prioritise choosing the right lender when looking towards finding a business vehicle purchase.
There are various financers that you can take advantage of. They include:
Financial Institutions
The first group to consider when looking towards business vehicle finance are financial institutions. They include banks, building societies, and credit unions. They can provide funding in the form of loans, lines of credit, and overdrafts.
Finance Companies
You can always approach a finance company for business vehicle financing. However, in most cases, these companies’ partner with a retailer. So, it’s quite similar to the option above.
Retailers
You can also try out retailers for your business vehicle financing. Typically, you will purchase the necessary vehicle through store credits. Usually, these stores run a partnership with a finance company to provide this finance option.
Although it comes with a much higher interest rate, you can get some stores to provide a free period. This way, you don’t have to pay any interest during that period.
Choosing the Right Lending Company
Since you know how important it is to pick the right lender, you might be wondering how. Here are some ASIC guidelines on picking the right lender for your business vehicle financing.
- Ensure they have a license provided by ASIC: before picking a lender, ensure they have permission to render such services. Alternatively, ensure they represent someone who has a license. For you to confirm, you can check the rental agreement or credit contract.
- Ensure they provide a credit proposal disclosure and credit guide: before signing the credit agreement, ensure it is a lender that has provided this document. Also, the material the lender provides must reflect their license number, charges and fee, contact details, and the dispute resolution mechanism.
- Ensure they provide a quote for their services: ensure you only sign after you get this quote. However, you can waive it if it is a free service or there is an existing write contract stipulating how much you will pay.
Other Lending Guidelines
The Australian Securities & Investments Commission provides some basic guidelines that regulate loan deals between you and financers. So, you can make an informed decision; here is a short guide.
Loans of $2000 or Lower
If you are looking to acquire a loan option that is equal to or less than $2000, here are some rules that guide it.
- Lenders cannot ask you to repay within 15 days
- The fees concerning that loan must be paid between 16 days and one year
- Lenders can only charge you for establishment fee once, and it must not be over 20 per cent of the actual loan amount
- Lenders can only charge you for monthly account fee that is not over 4 per cent of the exact loan amount
- Lenders cannot recoup over 200 per cent of the exact loan amount for missing a payment or all
However, this maximum limit doesn’t apply to Authorised Deposit-taking Institutions like banks, credit unions, building society or credit cards.
Loans between $2001 and $5000
Here are some rules that guide this loan category.
- The charges concerning that loan must be paid between 16 days and two years
- Lenders can only charge you a one-off cost of $400
- Lenders cannot charge you more than 48 per cent annually for interest, including other charges
Loans over and $5000
Here are some rules that guide this loan category.
- Lenders cannot charge you more than 48 per cent annually for interest, including other fees.
However, this maximum limit doesn’t apply to Authorised Deposit-taking Institutions.
DISCLAIMER: The information presented above is nothing more than a GENERAL MATERIAL for personal use and consideration. They do not, in any way, constitute an advice or recommendation from SNOG. Hence, we do not take liability for errors in the presentation and/or interpretation of the facts highlighted herein. Also, we do not take responsibility for the analysis and exposition on information present in the public domain. We recommend that you consult with an accountant or financial advisor if you are looking for a specific recommendation regarding your financial needs or circumstances.