Four Ways to Finance a Business Car
| Structure | Who It's For | Ownership | Tax Benefit | Rate From* |
|---|---|---|---|---|
| Chattel Mortgage | ABN holders (GST-registered) | You from day 1 | GST credit + depreciation + IAWO | 5.99% |
| Finance Lease | ABN holders | Financier (you pay residual) | Full payment deductible | 6.25% |
| Novated Lease | PAYG employees | Financier | Pre-tax salary deduction | 6.25% |
| Operating Lease | Fleets / short-term | Financier (return at end) | Full payment deductible | 6.49% |
*Rates indicative only, subject to lender approval.
Chattel Mortgage (Commercial Goods Loan)
The most popular choice for GST-registered business owners. You take ownership on day one, the lender provides a secured loan, and you repay over 1–7 years. Most banks now call this a commercial goods loan.
Why It's Popular for Business Cars
- GST credit upfront: On a $55,000 car (inc GST), you claim $5,000 back on your next BAS.
- Depreciation: Claim the car's decline in value each year as a tax deduction.
- Instant asset write-off: Eligible small businesses can deduct the full business portion immediately.
- Flexible balloon: Choose 0–50% to manage your cash flow.
Compare Business Car Finance Rates
Tell us the car and we'll show you the best rate across 30+ lenders — free, no obligation.
Get a Free Quote →Novated Lease (For Employees)
If you're a PAYG employee, a novated lease is the most tax-effective way to finance a car. Your employer deducts lease payments and running costs (fuel, insurance, registration, servicing) from your pre-tax salary.
Key Benefits
- Income tax savings: Reduce your taxable income by the lease and running cost amount.
- One payment covers everything: Finance + fuel + insurance + rego + servicing + tyres.
- No ABN needed: Available to all PAYG employees whose employer offers salary packaging.
- GST saving: You effectively buy the car GST-free (the finance company claims it).
FBT Considerations
A novated lease attracts fringe benefits tax (FBT). This is typically managed using the Employee Contribution Method (ECM), where you make a small post-tax contribution to offset the FBT liability. For electric vehicles below the LCT threshold, FBT may be exempt. Read our FBT guide →
Finance Lease
The financier owns the car during the term. You make lease payments (fully deductible) and pay a mandatory residual at the end to take ownership. Good for businesses that want simpler tax treatment than a chattel mortgage.
- Lower monthly payments than chattel mortgage (mandatory residual reduces principal)
- One deductible figure per period — no depreciation tracking
- Potentially off-balance sheet
Operating Lease (Fleet & Short-Term)
A true rental — use the car and return it at the end. No residual, no disposal risk. Running costs can be bundled. Ideal for company fleets where you want predictable costs and regular upgrades.
- Lowest regular payments
- 100% off-balance sheet
- Return at end — no resale risk
- Best for 1–3 year cycles
Worked Example: $60,000 Business Car
A GST-registered sole trader finances a $60,000 (inc GST) Toyota HiLux SR5 over 5 years at 6.5%:
| Metric | Chattel Mortgage (20% Balloon) | Finance Lease (20% Residual) | Novated Lease ($100K salary) |
|---|---|---|---|
| Purchase Price | $54,545 (ex-GST) | $60,000 (inc GST) | $54,545 (GST-free) |
| GST Credit | $5,455 upfront | ~$91/month | N/A (claimed by provider) |
| Monthly Payment | ~$941 | ~$1,035 | ~$1,180 (incl. running costs, pre-tax) |
| Year 1 Tax Deductions | ~$8,500 | ~$11,200 | ~$14,160 (salary sacrifice) |
| End of Term | $10,909 balloon | $12,000 + GST | Residual, re-lease, or return |
Illustrative only. Use our calculator for personalised results.
Tax Tips for Business Cars
- Keep a logbook: For mixed-use vehicles, the ATO requires a 12-week logbook to establish business use percentage. Only the business portion is deductible.
- Luxury Car Tax (LCT): For 2025–26, LCT applies above $71,849 (or $76,950 for fuel-efficient vehicles including EVs). GST and LCT push the effective cost higher for luxury vehicles.
- Depreciation limit: The ATO caps the depreciable cost of a car at the car limit ($69,674 for 2025–26). Amounts above this can't be depreciated.
- Instant asset write-off: Small businesses can immediately deduct the business portion of eligible assets. Check current thresholds — full guide here.
- Electric vehicles: EVs below the LCT threshold may be FBT-exempt under a novated lease, making them exceptionally tax-effective for employees. EV finance guide →
Calculate Your Business Car Repayments
Enter the car price, choose your structure, and see repayments + tax savings instantly.
Open Calculator →How to Apply
- Choose your car — new or used, from a dealer or private sale.
- Get a quote — submit your details and we'll compare rates from 30+ lenders.
- Provide documents — ABN, ID, and asset details. For amounts under $250K, many lenders offer low-doc approval.
- Get approved — fast-track in hours, standard in 2–5 business days.
- Drive away — the lender pays the dealer and you take delivery.