When considering car finance, you first need to ask yourself one question: Is the vehicle for business or personal use?

The answer to this question will basically determine what type of loan you require.

If the vehicle is for business use you basically have 4 options:

• Corporate Hire Purchase,
• Finance Lease,
• Novated lease
• Operating Lease.
  

If the vehicle is for personal use, then a consumer loan is for you. A Consumer Car Loan is an everyday type loan. Generally taken for terms up to 5 years with a regular monthly repayment. Interest rates can be fixed for the term of the contract or variable over the term. In most cases the vehicle you are buying is held as a form of security for the loan. Thus these types of loans are sometimes referred to as secured loans or secured personal loans. The interest rate applicable to these loans will depend on the age of the vehicle, the amount you are borrowing and the term. As with any finance make sure you ask enough questions so that you are comfortable with the loan's options. Approval can be given in as little as an hour and almost certainly within 24 hours.

CarNet partners with competitive suppliers of personal finance. Why not enquire now and take the first steps to pre-approval, putting you in the driver's seat?

Business Loans

Corporate Hire Purchase.

Sometimes known as CHP or simply Hire Purchase it is available to companies and individuals for the acquisition of a vehicle or business purposes. The terms vary between 1 and 5 years and the interest rate is fixed for the term of the contract. Generally contracts are structure with a regular monthly payment set to payout the full amount by the end of the term. Alternatively by structuring the contract with a larger balloon payment at the end of the term reduces the monthly payment to suit your individual budget. At the end of the term you have the option to pay out the full amount or refinance over a further period of time.

Characteristics of a Corporate Hire Purchase:

• Vehicle to be used for business purposes.
• Easily structured to suit your budget.
• Deposit can be paid upfront to reduce the amount that you borrow.
• No GST on the repayments.
• The asset and liability are included on the balance sheet. (Companies)
• Interest and depreciation claimable as an expense for accounting and taxation purposes.

Finance Lease

Leases are a tax effective product that allows you to "lease" the vehicle with no capital outlay. As the name implies you are leasing the vehicle and ownership remains with the financier (lessor). You are responsible for regular monthly repayments, however the risks and benefits of ownership are transferred to you (lessee). With a lease no deposit or trade ins are made and the monthly repayments are worked on the purchase price of the car (less an allowance for GST), the terms range from 1-5 years with a residual at the end of the term. Although under the definition of a lease you gain no equity in the vehicle; it is common practice for the lessee to make an offer for the vehicle bearing in mind the residual value at the end of the contract to take ownership.

Characteristics of a Financial Lease.

• Available to companies and individuals where the vehicle is for business use.
• Lease rentals are generally tax deductible.
• Lessee responsible or the running costs and residual risk of the vehicle.
• Taxation guidelines apply to terms and residuals.
• The amount leased is the purchase price of the vehicle less the GST component which is claimed by the Lessor.
• Repayments and the residual attract GST.
• Residual is an estimation of the vehicles value at the end of the term.

Novated Lease

Novated leases are becoming increasingly popular as a means of including a car as part of your salary package to reduce your taxable income. A novated lease is effectively a three way agreement between an employee, their employer and the Lessor or financier. The employee leases the vehicle and through the novation agreement the employer undertakes to make the repayments on behalf of the employee for the duration of their employment. Lease payments and vehicle running costs are subject to fringe benefits tax. The fringe benefits tax is calculated on a sliding scale depending on the value of the vehicle and annual kilometres travelled. As with a financial lease the residual risk lies with the lessor, likewise any profit on sale benefits the employee.

Benefits a Novated Lease.

To the Employer:

• An off balance sheet item.
• Lease repayments and running costs are generally tax deductible. •
• No residual risk. To the Employee
• Possible taxation benefit.
• Transferable in the event of a change of employer.
• No restrictions in the use or type of vehicle provided.
• Can offer to purchase the vehicle at the end of the term.

Operating Lease

The difference between a finance and an operating lease is that an operating lease payments include the running costs of the vehicle. The fixed monthly repayment includes the lease and ongoing maintenance costs of the vehicle such as petrol, registration, tyres etc. The residual risk of the vehicle remains with the lessor (financier) and the vehicle is handed back at the end of the term.

Characteristics of an Operating Lease.

• Repayments are an off balance sheet item.
• One payment covering all running costs of the vehicle - easy accounting.
• No residual risk.

The definitions of the finance products listed here are very broad, before entering into any contract we recommend you seek independent advice from your accountant. This will ensure you choose the right product for your requirements.