Could you get a better deal on a work vehicle?
Need to upgrade the workhorse? Are you on a tight budget? As a trades person in Australia, you may be able to save with a commercial car loan (provided you use your vehicle at least partially for work).
Whether you’re working for a boss, are self-employed, or are the head of a small to medium business, you could potentially benefit by choosing a business car loan instead of a secured car loan.
Commercial car loans typically offer lower interest rates
Commercial car loans typically feature lower interest rates when compared to personal car loans. And, over the course of your loan term, that lower rate could potentially save you a lot.
Personal car loan interest rates vs. business car loan interest rates
| Loan Type | Personal | Business | Loan term | *Interest rate | *Comparison rate |
|---|---|---|---|---|---|
|
Secured Car Loans |
Yes |
No |
2-7 Years |
from 4.60% |
6.55% |
|
Chattel Mortgage |
No |
Yes |
2-7 Years |
from 4.10% |
6.05% |
|
Commercial Hire Purchase |
No |
Yes |
2-7 Years |
from 4.10% |
6.05% |
As you can see, the business car loan interest rates are lower by 0.5%. Over the lifetime of your car loan, that half a percent can add up and ultimately make a difference to the overall amount you pay in interest.
*These rates are used for illustrative purposes only, and may not reflect the lowest or highest rate available to you. For information specific to your situation, speak with a finance professional.
Image courtesy of caradvice.com.au
The difference 0.5% can make
Here’s how 0.5% can affect the overall amount of interest which you pay on your car loan.
For this example, we’re using a 2016 Toyota Hilux Workmate valued at $43,990.
We’re going to compare the costs of a personal secured car loan with a comparison rate of 6.55% against the costs of a commercial car loan (chattel mortgage) with an interest rate of 6.05%.
| Amount borrowed | Loan term | Comparison rate | Monthly repayment | Total interest | Difference |
|---|---|---|---|---|---|
|
$43,990 |
5 years |
6.55% p.a. |
$862 |
$7,715 |
|
|
$43,990 |
5 years |
6.05% p.a. |
$851 |
$7,098 |
-$617 |
As you can see, that 0.5% lower interest rate can equal more than $600 worth of savings over the course of the full loan term.
Searching for a loan for a work vehicle?
Whether you want to finance a ute, van, or other commercial vehicle, we could help you.
At Rapid Finance, we connect tradespeople with the right car loans for their circumstances.
Find out more on our business car loans page
What else can you do to lower your rate?
When choosing a car loan, it can be tempting to simply go with the option offered by your bank or car dealer. It can seem like the easiest solution.
However, your banking institution or car dealership may not offer you the lowest or most competitive interest rate. Here are three things you can do to seek out a solution with a lower interest rate.
- Shop around: Different lenders offer different rates, you could potentially find a lower rate simply by contacting numerous lenders and comparing quotes.
- Compare features: Choosing the right loan features can help you to avoid excessive fees associated with early exits and changes to the structure of your loan.
- Contact a car finance broker: A car finance broker is a specialist in car loans, they can compare a range of finance solutions to find you a more suitable car loan.
If a lender’s rate isn’t competitive, or you don’t trust their operation, walk away. There is a wide range of lenders to choose from in Australia. You may be able to find a better deal.
Choose a shorter term and pay less in interest
Commercial car loans typically feature loan terms of 3–5 years, although, they can be extended to as long as 7 years in some cases. You will decide on your term when taking out your car loan.
Choose a shorter loan term, and you will be required to make larger monthly payments. But, you will pay off your loan sooner, which means that you could pay less in total interest costs.
Here's the difference a shorter loan term can make in practice. For this example, we will once again use our 2016 Toyota Hilux Workmate valued at $43,990.
| 3 year loan term | 5 year loan term | |
|---|---|---|
|
Amount borrowed |
$43,990 |
$43,990 |
|
Comparison rate (%) |
6.05% p.a. |
6.05% p.a. |
|
Monthly repayments |
$1,339 |
$851 |
|
Total interest paid |
$4,223 |
$7,098 |
|
Difference |
-$2875 |
|
Not all the borrowers will have the option of choosing a shorter loan term. However, if you are able to manage the higher monthly repayments, a shorter loan term could save you in the long run.
"There is a wide range of lenders to choose from in Australia. You may be able to find a better deal."
Image courtesy of caradvice.com.au
Let us do the work for you
At Rapid Finance, we have access to a wide range of lenders and finance products. We can compare a variety of solutions to find finance that is right for you and your situation.
Apply with us, and you'll be assigned a dedicated finance specialist. They can take you through the entire process from start to finish. They'll make finding your new commercial car loan simple.
Find out more on our car loans page or call 1300 467 274