02/07/2025 · Last update: 02/07/2025

• Business Lending

How to Get a Loan for a Business Vehicle (FAQs and More)

The average business drops a whopping $58,000 on a loan for a business vehicle, according to Money.com.au’s 2025 research on thousands of car finance applications.

It’s a lot of money.

So whether you’re a sole trader looking for a reliable ute or a growing company in need of a fleet upgrade, the right financing approach matters.

This guide will break down the different business vehicle finance options, who can apply for them, and how they work. We’ll help you cut through all the confusing information out there, so you can make a smart choice that works for your company’s bottom line.

 

What is a Loan for a Business Vehicle?

A business vehicle loan helps you buy cars, utes, vans or trucks for your company operations. These finance offers typically follow a straightforward structure: you borrow the funds to purchase the vehicle, and then repay it in fixed installments over an agreed period.

 

The loan terms are designed to align with two important factors:

1 The expected operational life of the vehicle

2 Your business’s cashflow capabilities

This alignment ensures that you’re not still paying for a vehicle after its useful life has ended, and that the payment schedule doesn’t put undue strain on your finances.

Your Business Car Loan Options

There are different types of business car loans. The best choice depends on your company’s structure, tax situation, and how you’ll use the vehicle for your business.

Let’s break down the different loan types so you can spot which works best for your financial situation:

 

1. Secured Vehicle Loan

This is the bread-and-butter option for most business owners looking to buy a vehicle. Here’s the deal:

• You’ll have ownership of the vehicle from day one
• The loan is secured by the vehicle as its collateral
• Tax perks – You can claim taxes on purchase price, plus deductions for both depreciation and interest payments

It’s also called a chattel loan, where the lender gives you funds to buy the vehicle but keeps it as collateral until you’ve paid the loan in full.

 

2. Finance Lease

Think of this as renting with an OPTION to buy:

• The lender owns the vehicle while your business leases it via regular payments
• You will be responsible for the vehicle’s maintenance and car insurance
• When the lease ends, you can buy it, refinance, or opt for an upgrade

Car leasing is popular for businesses that update their vehicles every few years, like car rentals, car service companies, or logistic companies.

 

3. Operating Lease

This is the “worry-free” option of a finance lease or vehicle lending:

• Similar to a finance lease but typically includes maintenance
• Fixed monthly loan repayments cover almost everything
• Perfect if you hate surprise repair bills and uncertainty in your company’s financials

 

4. Hire Purchase

Think of hire purchase as a “try before you buy” for your business vehicles. You’ll drive it, maintain it, and show it on your books -but the lender keeps the title until you make the final payment.

The hire purchase comes with several unique advantages:

• On your books: The vehicle appears on your asset books, enhancing your portfolio
• Great for business owners that need expensive vehicles but need a type of loan that won’t stick them with a huge repayment amount
• Ownership pathway: Unlike a finance lease, you’re building equity with each payment toward eventual outright ownership

 

5. Novated Lease

A novated lease shines in industries where vehicles are used in the business but are also considered employee perks. Take pharmaceutical companies that provide medical sales representatives with vehicles to visit doctors and hospitals.

With a novated lease, the company, employee, and loan broker enter a three-way finance deal where the employee gets use of the vehicle while the employer makes the payments directly from the employee’s pre-tax salary.

After 3-5 years of service, sales reps can typically get the vehicles from the company at a reduced price. In many cases, the vehicles are given to the employee as a reward.

 

Why Does This Matter to You?

Choosing the wrong financing option can drain your cashflow and create headaches for years. Each option affects your tax situation, balance sheet, and bottom line differently.

For example, a secured loan might offer better tax benefits for a profitable business, while a lease might work better for cash-strapped businesses with seasonal income, especially if they don’t plan to keep it long.

The Rates and Terms for Business Loan Vehicles

Here’s what you need to know about the fees and charges in business car finance agreements:

 

The Fee Breakdown

• • Application Fee: Most lenders have an upfront charge when processing an application. You’ll only pay this once and only upon signing the loan agreement.
  • Service or Administration Fees: Some lenders tack on fees for managing your loan.
  • Early Repayment Fee: Think you might pay off your loan early? Check if there’s a penalty for doing so. Lenders often charge this to recover revenue from lost interest fees.
  • Late Payment Fees: Miss a payment deadline and you’ll likely face a penalty.

 

Loan Terms

How long do you have to pay off your business car loan? Here’s the scoop:

• • Most loans for a business vehicle run between 1-7 years, with 7 years typically being the maximum offered.
  • Purchasing a used vehicle? Expect a shorter loan term, especially for older models.

Remember this golden rule: the longer your loan term, the more interest you’ll end up paying overall.

 

What Is a Balloon Payment?

A balloon payment is a lump sum due at the end of your loan term, typically 20-40% of the total loan amount.

 

When a Balloon Payment Makes Sense for Your Business

• • Low Budget: balloon payments can reduce the monthly repayments so it’s a good idea for those with seasonal income or those that need to direct cash elsewhere during the growth phase.
  • Regular Fleet Upgrades: You can time the balloon payment just as when you’re about to purchase another vehicle. You can use your current vehicle’s trade-in value to help cover the balloon payment, so it’s perfect for businesses that change their vehicles every few years.

 

The Hidden Costs of Balloon Payments

While balloon payments temptingly lower your monthly payments, they come with significant drawbacks that might catch you off guard.

That final lump sum isn’t just waiting quietly, it’s growing. Because you’re paying less throughout the loan term, interest accumulates on a larger remaining balance, meaning you’ll ultimately pay more for your vehicle compared with a standard loan.

 

Other drawbacks include:

• • Refinancing challenges: With little equity built up in the vehicle, finding favorable refinancing can be difficult
  • Stricter qualification requirements: Lenders often demand higher credit scores or larger down payments to offset their increased risk
  • Higher interest rates: To compensate for their additional risk, lenders typically charge more compared to standard loans.

 

Carefully consider if the short-term cash flow improvements will outweigh the long-term disadvantages before you sign-up for a balloon payment.

What You’ll Need to Apply for a Business Vehicle Loan

Prepare your documents in advance to streamline your application and boost chances of approval.

 

Business Car Loans Require:

• • Time in business: An ABN two years or older will show lenders that you’re not a new entity
  • Financial history: Two year’s worth of your corporate or business bank statements
  • Tax documentation: Two years of tax returns to verify your reported income and business activity
  • Trading history: A minimum 6-12 months of business activity to prove you’re not just starting out
  • Revenue threshold: Some banks require an annual turnover between $75,000 to $100,000 to prove you have enough income to handle the repayments

 

Money.com.au‘s data shows that about 57% of commercial car loan borrowers have been in operation for 3 years or more, giving them an average loan amount of around $66,754.

That’s not to say startups with 12 months or less under their belt can’t get approved. The same study shows they get about $52,258 on average.

 

Documents Required for Business Vehicle Loans Over $250,000

The bigger the amount you want to borrow, the bigger risk to the lender. That’s why many of them will require further documentation, such as:

• • Profit and Loss (P&L) statements
  • Cash flow documentation to prove you have a steady recurring revenue
  • Asset collateral such as machinery or store equipment
  • Other financial statements to evaluate your business operations

In some cases, you may be expected to present a business plan detailing how a new motor vehicle, truck or ute, are necessary for your operations.

 

Extra Supporting Documentation

Some lenders are more discerning, so it pays to have extra documents to prove your business’s credit worthiness. Not all lenders will require these, but it does improve your odds.

• • Business plan: A clear explanation of how your operations and how the vehicle will serve your business needs
  • Legal documents: Business registration details and corresponding licenses will confirm your industry compliance and prove you have an existing business with enough cashflow
  • Collateral information: Second-hand vehicles will warrant more scrutiny compared to a new vehicle because its value has already decreased. Prepare details about the make and model of the vehicle you’re buying, along with information on past repairs just to be on the safe side.

Frequently Asked Questions About Business Car Loans

Can a new business apply for a car loan?

Yes, new businesses in New Zealand can get car loans, though eligibility requirements vary between lenders.

You may also need to provide additional requirements like proof of personal income or other funding sources, aside from those listed in the previous section.

Can I get a business car loan with bad credit history?

A bad credit history will count against your application, but it won’t automatically disqualify you. You still have a chance if you can demonstrate your business’s profitability.

To improve your odds:

1. 1. Target lenders that are most likely to approve your application. Talk to different financial specialists and give them your supporting documents to get a better interest rate.
   2. Refrain from applying with banks as they’re stricter
   3. Consider private lenders that accept credit-challenged applicants but shop around because they often charge higher interest rates

Do I need a deposit to get a car loan for business purposes?

Deposit requirements vary by lender. Some lenders offer no-deposit financing and flexible car loans, while others require 10% to 20% upfront. Paying a deposit will give you a lower interest rate and improve your chances of approval. Check this post for more car loan finance FAQs.

Choosing the Right Vehicle Finance Option for Your Business in NZ

You can make a confident choice for your business venture, now that you’re armed with proper knowledge about the different loan options and application requirements.

Take what you’ve learned here and compare business loan options tailored to your situation.

Remember, these takeaways when looking for the best loan:

1. 1. Every loan type has pros and cons – From chattel mortgages to novated leases, each financing method has its own uses.
   2. Consider balloon payments carefully – Sure it will lower your monthly payments, but it will hit you with a substantial payment in the end. Talk to your accountant and make sure you’re prepared for it.
   3. Prepare your documentation – Sort out your paperwork early for a faster application and better chances of approval.

Call us for a quick, no obligation consultation, or apply for a loan now using our online form.