7 Things to know to finance a car as a business

As a business owner, it’s important to have a well-structured transportation system. You may need it for transporting your employees, raw materials, and client meetings.

However, businesses at an early stage lack enough capital to invest in car purchases. Instead, they prefer to invest the capital in other important business aspects like strengthening working capital.

You cannot neglect the car requirement for long and explore your options. The most common options for purchasing a car without paying money upfront are- financing it, buying a car on a lease, or getting a car loan.

Among these, car finance is one of the most popularly used options. It provides the flexibility to choose the type of finance and the car you want to finance.

You can finance a car for your business as a hire purchase, Personal Contract Purchase, Contract hire, or Finance lease. You can decide by exploring these options. That’s not all.

The blog discusses other aspects before checking car finance quotes for your business needs.

What to know before financing a car as a company?

Understanding business car finance could be tricky, but it helps you know the possibilities better. If financing a car for the first time as a business, the tips may help. Here is what you need to know about business car finance:

1)      Car finance and car loans differ

In car finance, you must pay at least 10% of the cost upfront. Whereas, in car loans, you do not need to pay anything upfront. The car acts as collateral on the car loan.

Car finance provides you with multiple options to finance a car. You can buy, exchange, or use a vehicle for a particular time. However, one takes a car loan only to be a legal owner. You can also purchase the car in car finance by paying the dues.

2)      Check whether your business qualifies

Before beginning with the application process, know whether your business is eligible for car finance. Sole Traders, Limited Liability Partnerships, Public Limited Companies or a Limited Company may qualify for car finance.  As one of these, you may explore the best car finance quotes.

  • Car financing provides tax benefits

You may qualify for tax benefits depending on the type of vehicle you choose and the purpose of financing one. It grants you the opportunity to deduct some or all taxation costs. For example, if you purchase and use a vehicle for business only, you may deduct 100% of the taxation costs or liabilities.

However, if not whole, you can claim the vehicle depreciation costs. You may also claim vehicle maintenance, repair, fuel, and other related costs.

  • Meet business car finance eligibility criteria

The loan provider conducts a basic credit check to determine your chances of qualifying. He checks and verifies the credit information from agencies. The requirements may differ from provider to provider. However, the basic requirements stay the same. Meet criteria like:

  • Must be operating in Ireland for 3 years
  • Should have a well-detailed business plan
  • Should possess a business registration proof
  • Provide a financial brief of directors or a sole trader
  • A detailed view of management accounts
  • Provide detailed Public records
  • Provide Business bank details

You can qualify if you can provide the information with transparency.

5)      Should be able to afford the payments

The eligibility criteria and credit screening ensure the affordability of the business. Thus, before applying, analyse your credit report and review changes. It is important to take out bad credit car finance with a lender. The better your finances look, the higher the possibility of qualifying. In case of poor credit, the lender may need the director’s guarantee to approve the loan.

Getting a car finance for a low credit history is challenging. Wait before signing the agreement. Analyse whether you can wait until your credit score improves. Additionally, analyse whether you can make regular repayments on the loan. Here, analyse your monthly liabilities and emergencies that you often face. Does it leave you with enough financial flexibility? If yes, go for it.

6)      Must have the right insurance cover

Every car finance provider requires the borrower to get the right car insurance first. It protects businesses and vehicles in an accident.  The insurance coverage you need depends on the type of vehicle you want to finance, the purpose, and how old it is.

Usually, the premiums for used car finance covers are higher than new ones. It is because the old one requires more maintenance. Thus, insurance premiums may add to the costs.

Choose a car that retains its value and may increase in the future. You can use the equity to finance another car on a new agreement and reduce your liabilities. You then may get car finance with low monthly payments.

7)      Factors that affect your monthly payments

Certain financial factors determine the monthly payments or loan amount you pay on an agreement. Knowing these factors will help you explore your options better. It will help you ensure affordable car finance. Thus, check these factors while exploring the car finance quotes:

a)      The annual mileage allowances.

It measures the total miles you can legally cover in a year as per the agreement. The more mileage you cover, the more you pay. This is because a car with a maximum mileage cover depreciates quickly.

b)      Deposit you provide

As mentioned above, you must provide a 10% deposit to qualify for car finance. However, you can provide more amount as a deposit if:

  • You have a poor credit history but want affordable finance
  • Want to reduce your repayments towards car finance
  • Want to fetch affordable interest rates

If you want to bridge some amount to your deposit but cannot, contact legal money lenders in the Ireland marketplace.  They may help you provide a higher deposit by helping you with some cash. In this way, you can fetch affordable car finance and pay less throughout the term.

Bottom line

These are some aspects you must know before applying for business car finance. It will help prepare your finances, credit report, and deposit needs. Moreover, exploring the best quotes according to your affordability and car needs helps you understand the best quote better. Mark your research by basing the above points as the criteria. It will help you get through your dream car agreement.


Leave a Reply

Your email address will not be published. Required fields are marked *