Car Loan for a Business: Everything you Need to Do
Car Loan for a Business: Everything you Need to Do
Posted on September 29, 2022
If you need a car loan for a business in Ontario, whether it is a taxi service or you are driving for Door Dash, etc., these suggestions are going to help you find the best car loan that suits your needs.
Should you Lease a Car for Business?
One of the benefits of leasing a car for your business is being able to write off the entire payment as a business expense.
This can help you save money on taxes, but there is a drawback to using a lease for your business, namely mileage.
When you sign a lease, the lender expects the vehicle to be returned at a predetermined date in a reasonable state of repair, accounting for normal wear and tear.
One way this wear and tear is regulated is by limiting the number of kilometers you can log on the vehicle before incurring a fee per KM over the limit.
If your business involves a limited amount of travel, say 20,000 km per year or less, then a lease may be a great option, but if you expect to drive more than 20,000 km per year, a lease will not make sense for you.
Budgeting for your new car loan for a business
Something that new business owners face is the challenge of managing the cash flow of the business.
There are weeks when you have more income than others, but you need to work out how much cash you can put towards financing the purchase of the car.
Average Car Payments. Source: Credit Karma
The median monthly car payment in Canada is nearly $600, but since you are running a business, the insurance for the vehicle is going to cost more.
Commercial auto insurance can be substantial, so you will need to allow roughly $1,000 per month to cover the vehicle payment, insurance, and maintenance (fuel prices are something separate).
Making the strongest possible case to secure financing for your new vehicle
Prospective lenders are now more risk-averse than they’ve been for quite some time. These lenders will want to make sure you are capable of repaying the loan as agreed.
To address those concerns, your credit score will need to be north of 650; you can still get approved if your score is under 650 (from places like us!), but why tempt fate?
Credit Score Levels
Your income documents will also need to be on point; since you are an entrepreneur and don’t have an employer, lenders will ask to see your bank account statements for the last six months and your income tax notice of assessments.
Provided you have these documents readily available; you should be able to get approved for a car loan.
Securing the best entrepreneur car loan terms
Even if you have all of the necessary documentation in place, you will still need help in finding the right lender.
This is where a local car dealership truly shines; by going through a local dealership, you will certainly get the best possible terms, so why not contact your local dealership today!
If you need a car loan right away Click here to get pre-approved, we'd love to help!