Business car loans: financing a car through your business

Financing a car through the business sounds simple: the business borrows, the business owns the car, the business claims the costs. The finance part really is simple. What catches owners out is the tax framework sitting around it, which treats passenger cars very differently from utes and vans and changes a little every 1 July. Get that framework right and the loan choice follows naturally.

Which numbers apply for 2026–27?

Three sets of figures shape almost every business car purchase this financial year, according to the ATO.

Figure	2026–27 amount	What it does
Car limit	$69,883	Caps the cost you can depreciate on a car first used or leased this year
Maximum GST credit	$6,353	One-eleventh of the car limit; the most GST you can claim back on a car
Luxury car tax threshold	$80,809 (most cars), $91,661 (fuel-efficient)	Above this, luxury car tax of 33% applies to the excess

These limits apply to “cars” in the tax sense: vehicles whose design payload is below one tonne and that carry fewer than nine passengers. A heavy-duty cab-chassis or a twelve-seat minibus falls outside them, which is why our commercial vehicle finance page treats utes, vans and light trucks separately.

Who should own the car?

This decision has more tax effect than the choice of lender.

• Sole trader. You own the car personally and use it in your business. You claim the business-use share of running costs and depreciation, usually backed by a 12-week logbook. Fringe benefits tax doesn’t apply because there’s no employer providing the car to an employee. See our page on sole trader business loans.
• Company or trust. The entity owns and finances the car. If a director or employee can use it privately, including driving it home, that’s usually a fringe benefit and FBT may apply, unless an exemption fits.
• Partnership. Similar to a sole trader in many respects, but ownership and claims are shared between partners.

Before you sign, ask your accountant which entity should be the borrower. Changing the owner after settlement means refinancing.

Electric cars and the FBT exemption

Since 2022, eligible battery electric cars provided by employers have been exempt from FBT when their first retail price is below the fuel-efficient luxury car tax threshold. Plug-in hybrids lost that exemption from 1 April 2025, except for existing arrangements.

On 5 May 2026 the government announced that the electric car exemption will be wound back. As announced, from 1 April 2027 the full exemption would apply only to electric cars costing up to $75,000, with a partial discount above that up to the luxury car tax threshold, and from 1 April 2029 the full exemption would end. Existing arrangements are meant to be protected. If an electric car is part of your plan, the timing of the purchase could matter, so confirm the current rules with your accountant before you order.

Not sure how the numbers land for your own car purchase? Tell us about the car and your business. It’s a quick form and asking leaves your credit report exactly as it was.

Which finance structure suits a business car?

• Chattel mortgage. The most common choice. The business owns the car from settlement, the lender holds security, and the GST credit (capped at $6,353) is claimed on the next BAS.
• Hire purchase. The financier owns the car until the last payment; tax and GST outcomes are much the same as a chattel mortgage.
• Finance lease or operating lease. The lessor owns the car. Watch the luxury car lease rules: where a leased car costs more than the car limit, the lease is treated for tax as a notional sale and loan, and your claims are capped.
• Novated lease. A salary packaging arrangement for employees rather than a business purchase. Our novated lease vs chattel mortgage comparison explains when owner-employees weigh one against the other.

A worked example

The numbers below are illustrative only.

A physiotherapy practice, run through a company, buys a $95,000 SUV (including GST and luxury car tax) for the principal to visit clients. It uses a four-year chattel mortgage with a modest balloon.

• GST: the GST in the price is more than $6,353, but the practice can claim only $6,353 on its BAS.
• Depreciation: worked out on a capped cost tied to the $69,883 car limit, not on $95,000.
• FBT: the principal drives the car home each night, so the company has a fringe benefit to manage, either by paying FBT, making employee contributions or using a logbook to reduce the taxable value.
• The loan: the practice compares lenders on the total of every repayment plus the balloon, using our business loan repayment calculator.

The accountant points out that a $70,000 car would have attracted nearly the same tax benefit, which changes the conversation about which model to buy.

What do lenders check for a business car loan?

• ABN and GST registration. Two years opens most doors; newer ABNs may need a deposit or property ownership.
• Business use. The loan is for a car used predominantly in the business. Lenders may ask how.
• Income evidence. Bank statements for smaller amounts; tax returns or BAS for larger ones. Some lenders offer low-doc car finance for established borrowers with clean credit.
• Credit files. Business and directors. Many lenders will look past a paid default with an explanation.
• The car. Age, kilometres and whether the seller is a dealership or a private owner. On private sales, a PPSR search confirms there’s no existing finance.

Costs to compare

Ask every lender for the establishment fee, any monthly account fee, the balloon amount, early payout terms and the total dollars repaid over the term. This directory doesn’t publish rates. A slightly higher monthly repayment with no balloon can be cheaper overall than a lower one with a large lump sum at the end. If the car is part of a wider plan, our page on finance for buying vehicles compares other ways to fund it, and the depreciation glossary entry explains how the decline in value is worked out.

Your next car, financed properly

The best business car loan is the one that suits how the car is owned, used and taxed, not just the lowest repayment on a dealer’s screen. If you’d like help weighing a chattel mortgage against the alternatives, or finding a lender after the bank said no, we’re here for exactly that.

Our form is brief, about a minute from start to finish. Making an enquiry doesn’t put a mark on your credit history, and your details aren’t sold on or shopped around to lenders who’ll ring all week. Someone experienced in vehicle lending reads your answers and picks up the phone to you. Please describe the car, the price and your business accurately; good information is how the right structure surfaces on the first attempt.

Start your business car enquiry →