Financing a vehicle for your business is about more than just buying a car – it’s about finding a solution that fits your needs. Whether you’re after a single work vehicle or an entire fleet, there’s a range of flexible options to help you purchase or lease vehicles for commercial use.
Types of business car loans
There are four main products to consider under the business car finance umbrella:
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Chattel mortgage
A chattel mortgage is the only type of business car finance where you own the vehicle from the start. It’s structured in much the same way as a secured car loan, with repayment periods extending from one to seven years and instalments paid on a weekly, fortnightly or monthly basis.
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Finance lease
Under a finance lease, your financier buys a car and leases it to your business, with monthly costs charged to hire the vehicle. At the end of your lease, you can choose whether to buy the car by paying the residual out of pocket, trade in or sell the car to cover the residual and lease another car, or refinance the residual and extend the term of your lease.
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Operating lease
Operating leases work in the same general way as finance leases, except they don’t come with a residual payment. Instead, they enable you to hand the car back after the lease payments are completed. On-road costs are also typically sorted for you and incorporated into your payments. This makes them more expensive, but leaves the risk of vehicle obsolescence with the lessor, not you.
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Hire purchase
Under a hire purchase agreement, your financier purchases the vehicle on your behalf and hires it out to you in return for ongoing payments. Once your business has repaid the full purchase price of the vehicle, ownership is transferred to you.
While technically not a business car finance option, there's also novated leasing. This option is generally more suitable for companies that also want to allow employees to use their vehicles for personal use and receive tax benefits. However, they’re still available to business owners who pay themselves a salary.
Which option should I choose?
The best business car finance option for your company will depend on how you plan to use your vehicles, your cash flow and whether you prefer to own or lease. Here are a few instances where one option may be more suitable than the others:
- If your business has changing vehicle needs – which is often the case for companies with larger fleets – an operating lease can offer flexibility with managed services and no ownership risks.
- A chattel mortgage can suit businesses looking to own their assets from the outset while spreading the cost over time.
- Finance leases can offer a middle ground, giving you the flexibility to either buy the vehicle at the end of the term or return it.
- Hire purchase agreements may be suited to businesses using off-balance sheet accounting for their assets.
If your business lacks full financial records, a low doc car loan may also be an option, which lets you finance a work vehicle under a chattel mortgage using alternative documentation. For example, if you’re a property owner with an ABN 12 months or older, you may not need to send documents at all. Non-property owners may be able to use business bank statements, BAS and information on assets and liabilities instead.
This type of finance is popular with self-employed borrowers and small business owners, as well as those seeking a quick car loan for their business. However, they often come with higher interest rates than standard car loans.
Business car loan interest rates
As of September 2025, the cheapest business car loan interest rates available through Savvy's partnered lenders are as follows:
Why apply for a car loan with Savvy?
How can a business vehicle be used?
A business vehicle can be used for a range of purposes, such as making deliveries, attending client meetings, travelling to work events or conferences, or transporting tools and equipment. It can also be assigned to an employee for regular use, but any personal use needs to be carefully managed.
Under both chattel mortgages and commercial car leases, a business vehicle must be used predominantly (more than 50%) for business purposes. While it can be used for personal reasons, such as commuting, weekend trips or school drop-offs, this may attract Fringe Benefits Tax (FBT). This is a tax paid by businesses on certain benefits provided to employees, including personal use of a company car. Charged at a rate of 47%, it can significantly add to business costs.
If you are a sole trader or in a partnership, you aren’t considered an employee, so any benefits you provide to yourself – including vehicle use – aren’t subject to FBT. However, you’ll still need to track business and personal use to correctly claim tax deductions.
How much does a business car loan cost?
In 2024–25, the average business car loan arranged through Savvy was $49,498. However, the cost of a business car loan depends on more than just the vehicle’s purchase price. There’s a range of other factors that will influence how much you’ll pay overall.
Interest rates
Your interest rate is the single biggest factor in determining loan cost. While a 1.00% p.a. difference in rates may not sound like much, it can add thousands of dollars in interest across the life of the loan. Let’s see how this would look for a five-year loan on an Isuzu D-MAX:
Isuzu D-MAX X-Terrain ($70,500)
| Interest rate | Monthly repayment | Total interest | Total cost |
|---|---|---|---|
| 6.00% p.a. | $1,363 | $11,278 | $81,778 |
| 7.00% p.a. | $1,396 | $13,259 | $83,759 |
| 8.00% p.a. | $1,429 | $15,270 | $85,770 |
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6.00% p.a. 7.00% p.a. 8.00% p.a. |
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$1,363 $1,396 $1,429 |
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$11,278 $13,259 $15,270 |
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$81,778 $83,759 $85,770 |
Calculations and interest rates are for illustrative purposes only and do not include other car-buying costs. The rate you receive on your car loan may be different to the rates listed above. Model costs obtained through CarsGuide and are correct as of September 2025. All figures are rounded up to the nearest dollar.
As the table shows, the difference in monthly repayments between 6.00% p.a. and 7.00% p.a. is only $33. Over five years, though, that adds up to almost $2,000 in extra interest.
Note: Interest on the business-use portion of a vehicle is generally tax-deductible, which can help to offset a significant portion of this expense.
Loan term
A longer repayment period can also push up the cost of your loan, as you’ll have more interest to pay. Let’s look at an example of a business buying a Toyota HiAce LWB, with an interest rate of 5.99% p.a.
Toyota HiAce LWB ($56,500)
| Term length | Monthly repayment | Total interest | Total cost |
|---|---|---|---|
| 3 years | $1,719 | $5,369 | $61,869 |
| 5 years | $1,092 | $9,022 | $65,522 |
| 7 years | $825 | $12,809 | $69,309 |
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3 years 5 years 7 years |
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$1,719 $1,092 $825 |
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$5,369 $9,022 $12,809 |
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$61,869 $65,522 $69,309 |
Calculations and interest rates are for illustrative purposes only and do not include other car-buying costs. The rate you receive on your car loan may be different to the rates listed above. Model costs obtained through CarsGuide and are correct as of September 2025. All figures are rounded up to the nearest dollar.
As you can see, stretching the loan term out over five years compared to three saves your business over $600 per month in ongoing repayments. Your interest bill will increase by more than $3,500, though.
Other factors
Other variables that could impact the final cost of your business car loan include:
- Fees: on top of interest, car loans come with a range of fees attached that can drive up the cost further. These can include establishment fees, monthly fees and break fees, which can add hundreds to thousands of dollars to the final cost. However, break fees only apply if you pay off your loan ahead of schedule.
- Deposit: putting down a deposit reduces the size of your loan and lowers your interest payments. For example, contributing $10,000 towards the Isuzu D-MAX above would reduce the loan amount to $60,500 and lower the total interest paid over five years at 6.00% p.a. to $9,661. That’s a saving of more than $1,500.
- Additional repayments: if your loan allows extra repayments, using them can reduce interest and help you pay off the loan sooner. For instance, adding $100 per month to the seven-year Toyota HiAce loan could save over $1,700 and clear the debt about ten months early. However, it’s important to consider whether your lender charges any early repayment fees before you do this.
- Balloon payment: opting for a balloon payment reduces your regular repayments but means a lump sum is due at the end and that you’ll pay more interest overall. As an example, adding a 20% balloon to your D-MAX car loan at 7.00% p.a. would reduce your monthly repayments to $1,199, but your total interest would increase to $15,542. You’d also need to budget for a $14,100 balloon payment at the end of the loan term.
How to apply for business vehicle finance
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Complete our simple online form
Tell us about your business, the vehicle(s) you want and how much you’re looking to borrow.
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Provide your documents
Provide supporting information, such as ID, proof of income and business financials.
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Compare your finance options
Your Savvy consultant will review offers from our lending panel and call you with tailored deals.
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Lock in your vehicle
Choose your vehicle or get help from our in-house car broker team.
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Submit and finalise your application
We’ll lodge your application and guide you through the approval process.
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Sign and settle
We’ll handle settlement and the vehicle will be transferred to your business.
What tax benefits are available through business car finance?
Businesses in Australia can claim tax deductions on eligible expenses when buying or leasing a vehicle for work. This may include claiming GST credits, interest or other operating costs, depending on the type of loan or lease and how the vehicle is used.
The tax benefits vary by finance type. Here's what you could claim for each arrangement:
| Chattel mortgage | Hire purchase | Finance lease | Operating lease |
|---|---|---|---|
| GST on the purchase of the vehicle Interest on loan repayments Running costs/business-use expenses Depreciation of the vehicle |
GST on the purchase (claimable by the financier) Interest on loan repayments Running costs/business-use expenses |
GST on the purchase (claimable by the financier) Up to 100% of leasing payments Running costs/business-use expenses not included in your payments |
GST on the purchase (claimable by the financier) Up to 100% of leasing payments Running costs/business-use expenses not included in your payments |
Expenses that the ATO considers claimable include depreciation, fuel and oil, insurance premiums, repairs and servicing and vehicle registration. However, costs like licence renewal, fines and penalties aren't tax-deductible.
When claiming vehicle expenses, be aware that you can only claim tax deductions for your vehicle’s business use, not personal use. For example, if you lease a vehicle and use it 65% for business, you can typically claim 65% of your payments and related expenses. While this does not generally cover travel between your home and place of work, you can claim tax deductions for trips to client meetings, conferences and temporary worksites.
Likewise, the amount you can claim for GST is determined by business usage. Businesses that exclusively use their vehicles for commercial purposes will be able to claim the full GST amount (up to the maximum credit limit, which is $6,334 in the 2025-26 financial year), while those buying a car for both business and personal use in Australia can claim a partial credit.
This information only serves as a guide, so speak to your accountant or a tax professional for more information specific to your situation.
"Business owners who primarily use their car for work should strongly consider a commercial loan option. The potential tax benefits can add up to thousands of dollars each year alone. Those are funds that can be reinvested back into growing your business."
How commercial car loans can boost your business
Business car loan residuals
End-of-term payments are a common feature of commercial car finance, but how they work differs depending on whether you’re taking out a loan or a lease.
Business car loan balloon
A car loan balloon payment is an optional lump sum paid at the end of your chattel mortgage. It lowers your monthly repayments during the term, but increases the total interest you’ll pay overall. You’ll also need to plan ahead to cover the final payment.
The amount you will pay will be agreed at the beginning of your term with your lender, typically ranging from 20% to 50% of your loan amount. When choosing a balloon size, consider how it fits with your business budget. A larger balloon reduces monthly repayments but increases the final payment and total interest, so it’s important to plan ahead to ensure you can cover the lump sum at the end of the term.
Here’s an example showing how different balloon sizes affect the overall cost of a $40,000, five-year business car loan at 6.50% p.a. interest:
| Balloon size | Balloon amount | Monthly repayment | Total interest |
|---|---|---|---|
| 0% | $0 | $783 | $6,959 |
| 20% | $8,000 | $669 | $8,167 |
| 30% | $12,000 | $613 | $8,771 |
| 40% | $16,000 | $556 | $9,375 |
| Calculations are for illustrative purposes only and may not reflect the interest rate you'll receive or the balloon payment you may be offered. | |||
Car lease residual
Unlike a car loan, a finance lease always includes a residual payment at the end of the term. This is calculated as a percentage of the vehicle’s estimated value at lease-end, based on ATO minimum thresholds – though your leasing company may set a higher residual.
The ATO’s minimum residual values for car leases are:
| Lease term | Residual value | ||
|---|---|---|---|
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12 months
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65.63%
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24 months
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56.25%
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36 months
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46.88%
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48 months
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37.5%
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60 months
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28.13%
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| Source: Australian Taxation Office (ATO) | |||
