Car Loans Blog

Consumer Car Loan

A Consumer Car Loan is when a consumer finances a car in their name and will be using the car for predominantly personal use.  The consumer has ownership of the car from the commencement of the car loan while the Financier places an encumberance over the car as security for the loan.

Benefits of a Consumer Car Loan:

• Offers fixed interest rate for the term of the loan
• Flexible terms from 24 – 60 months
• Option to have a balloon payment (lump sum payment) at the end of the car loan to reduce monthly repayments
• Allows consumer to put deposit or equity towards the new car
• Consumer has ownership of the car from the outset of car loan
• Able to finance in the onroad costs and insurance for the car

Novated Lease

A Novated Lease loan is a 3-way arrangement between the employee, the employer and the finance company.  The employer is responsible for making the lease payments to the finance company as organised through a Deed of Novation.
The Deed of Novation stays in place until the end of the lease term, or until the employee ceases
employment with their employer.
 

Fully Maintained Novated Lease

A Fully Maintained Novated Lease loan is an arrangement where all of the running costs of the car are included as part of your salary package.  Running costs that can be packaged include:

• Fuel
• Maintenance & Servicing
• Comprehensive Insurance
• Repairs
• Tyres
• Registration
• Car lease rental

A Non-Maintained Novated Lease loan also known as a Standard Novated Lease covers the car lease rental only.  The lessee is responsible for all maintenance and other running costs of the car.

Benefits of a Novated Lease

There are many benefits associated with novated leases.  This  includes:

• The employee can choose to lease a new or used car.
• The car can be leased where there is no business use and only private use.
• When an employee ceases employment with the nominated employer, the employee takes responsibility for the lease payments.
• The car does not appear on the employer’s Balance Sheet.

Added Benefits are

• The lease repayments are fixed over the term of the loan.
• Flexibility in term for the novated lease ranging from 12 to 60 months.
• As the finance company has ownership of the car, they claim the GST on the purchase price.  This means that the employee only finances the purchase price excluding GST.
• Under a salary packaging arrangement, the employer can claim an input tax credit for the GST component of the lease payments and other running costs of the motor vehicle.

Finance Lease

A Finance Lease also known as a car lease, asset lease or vehicle lease is a commercial finance product which allows the customer to have the use of a commercial vehicle and the benefits of ownership, while the financier retains actual ownership of the vehicle.

The financier purchases the car on behalf of the customer, who then leases the car back from the financier and pays a fixed monthly lease rental for the term of the lease. 

At the end of the lease the customer can either pay a residual value (final instalment) on the lease and take ownership of the car, trade it in or re-finance the residual and continue the lease.

Benefits of a finance lease are:

• Flexible contract terms ranging from 12 to 60 months (one to five years)
• Fixed interest rate
• Fixed monthly lease rentals
• A residual is applied to a lease, lowering monthly payments
• Tax deductions are available when the car is used for business purposes
• As the GST contained in the car’s purchase price is claimed back by the financier, only the vehicle’s price exclusive of GST is financed, lowering monthly payments
• Ability to make advance lease payments for tax deduction or cash-flow purposes
• The lease is secured against the car, allowing lower interest rates

Chattel Mortgage

A Chattel Mortgage loan is a particular type of finance used by businesses or sole traders for the purpose of purchasing a new or used car.

Chattel Mortgage is essentially a Mortgage over the car to be financed. Chattel Mortgage is classed as a cash sale in that the vehicle automatically becomes yours on purchase and the finance company takes a mortgage over the car.  However for tax purposes you can claim depreciation, running costs and interest paid, against your business income. The Chattel Mortgage allows businesses to claim the full input tax credit from GST upfront on the BAS (Business Activity Statement).

The Chattel mortgage provides a flexible finance option as you have the ability to either finance the full purchase price or alternatively, you can include an upfront deposit or trade-in to reduce your rental commitment.  A Balloon Payment (Residual) may also be placed at the end of the term to effectively lower your monthly repayment.  Alternatively, you can choose to structure your rentals to clear the debt in full over the term of your agreement (fully amortised).