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Loans and Leasing in Canada

Few people have enough budget to buy a new car. Sometimes it is impossible to pay immediately the entire prize. Therefore, instead of breaking one’s back and trying to earn money illegally, it is worth thinking about the only possible choice in this case – a loan that will allow you to buy a brand new car. Borrowing implies a certain payment scheme, as well as a remarkable responsibility. Before you go to bank or other financial company to get a loan in Canada or check for the options from smarter.loans, read this article.

When taking a car loan, you should accept every payment that you ought to make in order to repay a loan. As for terms, usually the longer the period is the lower the periodic payments are.

Leasing is a type of contract which means that you will have a car for some period of time with some restrictions. Leasing also implies shorter terms (say, 2 or 3 years), after which the company sets the value of the car based on its condition, configuration, mileage and other factors (residual value). Due to the fact that the amount you borrow is less than with a car loan, monthly payments are much less.

Buying a car in Canada: Why a car loan?

Loaning implies that the payments will eventually end and you will become the owner of the car. If you pay your loan off fast, there is a good chance to avoid major repairs if the service is done in a timely manner (the average length of productive life of a car in Canada is about 10 years).

Loan providers propose more flexible conditions in case of sudden changes in your life that will make you give up, whereas leasing companies usually impose serious penalties for breaking the contract. It is worth remembering about the pitfalls of lending. Of course, interest-free loans are very tempting, but sometimes their terms are strictly stipulated (from 6 years and longer). Think about it, because such obligations can be another burden. Finally, if you want to modify the car in any way (lift the jeep or put another muffler on a sports car), it is better to take a loan, since leasing implies no change in the design of the car.

 

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Yet, despite all advances in assembly technologies, no model can be considered ideal. Nevertheless, each rule has exceptions: a car that is considered the most reliable, can be “dead”, while a casual car manufacturer with a bad reputation will serve you long and without any problems.

Buying a car in Canada, be aware of the cost of insurance which can also vary greatly, because it depends on a lot of factors. The average value is $168 monthly. The cost of premium gasoline is $1.3 per liter. So be aware of monthly expenses in the amount of $200 per month. Moreover, do not forget about parking which can make at least $60 per month.

When & How To Use Business Car Loan

What is a business car loan?

A business car loan is a type of commercial finance designed specifically to suit the needs of commercial enterprises and employees.

From small businesses to large enterprises, business car loans are available for trucks, equipment, company fleets, and employee cars.

What types of business car loans are there?

The biggest difference between the different types of business car loans is the way that you make a claim for tax deductions.

There are four main types of business car finance:

Chattel Mortgages

A popular type of business car loan, a chattel mortgage allows a business to purchase and take ownership of a vehicle.

Advantages include the ability to claim the GST on the purchase in the first financial year, as well as claiming tax deductions on interest and depreciation. There’s also more flexibility in how you make your repayments.

Finance Leasing

A finance lease gives you the use of a vehicle for a fixed term, at a fixed rate. You can return the vehicle at the end of the lease, or make an offer to purchase it.

Your repayments will usually be tax deductible in full where the vehicle is used 100% for business purposes.

Hire Purchase

Similar to a finance lease, with the key difference being that at the end of a hire purchase agreement you will own the vehicle.

Novated Leasing

novated lease is a three-way agreement between you, your lender and your employer allows you to purchase a car for personal use with pre-tax income.

Line of credit

Using an existing line of credit to purchase a vehicle means no extra paperwork or application costs, but it’s only recommended if the vehicle is going to be used 100% for business reasons.

What do you need to look out for?

Depending on the type of business car loan that you take out, you’ll need to make sure that the vehicle is primarily used for business purposes.

If you aren’t the business owner, you’ll need to speak to your employer about getting a business car loan, as they may need to provide documentation.

How do business car loans compare to regular car loans?

A business car loan comes with lower interest rates than a personal car loan. There’s also a range of flexible loan structure and repayment options for business car finance that you won’t get with a personal car loan.

Business car loan application documents

When you apply for a business car loan, you will need to have your recent business tax returns to demonstrate the income of the business. You might also need a profit and loss statement from your accountant too.

If you do purchase a vehicle using a line of credit, you want to ensure that it’s used 100% for business. If the car is used, for example, 20% of the time for personal use, then 20% of the line of credit will be private debt and 80% will be business debt. It’s not best practice to mix personal and business debts.

Who does it suit?

A business car loan suits anyone who uses their vehicle primarily for work purposes.

This might mean that you drive to meet clients throughout the day or travel to worksites with your tools and workmates.

If you’re an employee rather than a business owner, speak to your employer about your business car finance options, as they will need to provide some of the paperwork for your car loan. Employees are most likely to consider a novated lease, though there could be other business car finance options available too.