The rigours that come with being a tradie can often leave you short of time to scout the market for a suitable vehicle, yet alone the appropriate form of finance to buy a new car. Given how important your car is within the scope of your livelihood, nothing should be taken for granted. The vehicle that best fits the job is the one you should have your eye on, even if it initially might seem out of your budget. That’s where the significance of your car loan makes all the difference.
Are you employed by a company?
If you are a tradie working on behalf of a company, one of the options you might have available to you is novated leasing. Sometimes this is also called a salary sacrifice car loan.
In essence, as an employee you would forgo part of your pre-tax salary to make repayments on the car and cover running costs. If your employer offers this product they are the one who collect the amount sacrificed from your salary and make repayments on your behalf with the financier.
This tri-party agreement can provide you and your employer distinct tax benefits arising from the fact that it helps reduce your taxable income. The car is also your property, so you don’t have to worry about relinquishing rights to use it however you wish if you change employer.
Are you self-employed or running a business?
If you intend to use the vehicle primarily for business purposes – that is, more than 50% of the time – then a chattel mortgage could be the right car loan for you.
A chattel mortgage is a commercial finance arrangement whereby the financier will register you or your company’s interest in the car on the Personal Properties Security Register, however they keep the title to the car as a form of collateral. Once you have fulfilled all obligations of the loan and repaid the debt, this title may be transferred accordingly.
When it comes to this type of car loan, there are some general benefits for tradies, however not everyone stands to gain. Therefore, always seek out personal financial advice before otherwise considering the product. With that said, some tradies may stand to benefit from perks like
- Being able to claim GST in the first BAS statement after purchasing the vehicle
- Flexible loan terms that extend to the balloon payment and length of the loan
- Using the car as collateral over the loan to attain lower interest rates
- Claiming depreciation on the vehicle and loan interest as tax deductions
Because everyone’s circumstances vary so wildly from one person to the next, make sure you speak to the right people. The type of work you do will also dictate the options you may want to consider, plus you need to have a fairly settled employment status to benefit from either of these loan options.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.