Business vehicle finance is important for many small businesses to be able to purchase a car as a business asset. Vehicles are necessary for all kinds of businesses to operate. As your business grows, and asset finance options become available, it might be a good idea to consider purchasing a business vehicle.
Having a company car offers many benefits. You could use it for transporting products and making deliveries, transporting staff, or simply just getting to work and meetings. And if you purchase the vehicle as a business asset, it could provide room for a tax deduction.
Follow this guide to learn how to access vehicle finance and what is needed to purchase a business vehicle.
How Do I Buy a Car Through My Business in South Africa?
Business vehicle finance is available to South African business owners looking for a company car. This type of financing works similarly to individual vehicle financing, except that the car is owned by the business.
To apply for a business vehicle finance plan, you will need to preset a business plan outlining how you will use the vehicle, and why the vehicle is necessary for your business. You will also need to preset the necessary documents to the lender, including things like monthly bank statements, your company’s registration and VAT number, and details of the company’s director and trustees.
Of course, you will need to prove that your business can afford the vehicle and that it makes sense. To get approved for business vehicle finance, the vehicle will need to be a suitable fit for the company and that it is not an overwhelming expense.
If you access business vehicle finance and purchase a car through your business, then the car becomes an asset owned by the business. This can help businesses access some tax dedication benefits.
How Does Business Asset Finance Work?
Business asset finance is when a company uses its balance sheet assets, such as inventory or investments, as a security to take out a loan. These assets that the company already owns are used to make it easier for a company to secure funding.
Business asset finance is usually used for higher ticket items that the business needs to purchase. This includes things like machinery and vehicles. It’s a common type of SME funding used to grow existing businesses.
Business asset finance helps businesses spread out the cost of expensive assets over time, instead of having to pay for them in one lump sum.
How Do You Buy a Car If You are Self-Employed in South Africa?
Getting approved for vehicle finance and purchasing a car if you are self-employed can be difficult. However, it is completely possible as long as you are able to prove that you can afford the vehicle financing.
The best way to buy a car as a self-employed person is to start by saving up a large deposit. By paying a significant lump sum upfront, you will be able to gain access to a vehicle loan and get better lending terms more easily. The deposit should be at least 20% of the value of the vehicle.
Next, you will need to prove your ability to repay the loan. To do this, you will need to provide at least three months’ bank statements and prove that you have a stable source of income.
What Are the Requirements to Qualify for Vehicle Finance?
The main requirement to qualify for vehicle finance, whether personal or business vehicle finance, is that you are able to prove that you can afford the vehicle. This will involve proving your income and financial standing.
It’s important to have good credit when applying for vehicle finance. This will help you secure a loan with more favourable lending terms.
You will also need to prove that you are a resident of South Africa and that you hold a valid South African driver’s license.
Many small business funding opportunities, including private and government funding, don’t include capital for vehicle financing. If your business requires a vehicle, then you may need to consider a separate business vehicle finance agreement.
This can be a great move for many businesses. Vehicles are necessary for many businesses’ daily operations. Plus, they could also come with some tax benefits. As long as you purchase a suitable vehicle for your business needs and are able to afford the vehicle, business vehicle finance options are always available.
