Commercial vehicle finance built around how your business runs

When finance is 'commercial'

Finance is commercial when the vehicle is used predominantly for business purposes — typically more than half the time. That single fact changes everything: the loan is not regulated under the National Consumer Credit Protection Act, the lender assesses your business rather than just you personally, and you generally need an active ABN.

Being outside consumer credit rules is not a downside. It means the products can be structured more flexibly — for cash flow, for end-of-financial-year timing, and for the way your accountant treats the asset. It does mean fewer consumer protections apply, so understanding the structure before you commit matters more, not less.

The three main commercial products

There are three products you will hear about most often, and they differ mainly in who owns the vehicle during the term and how GST and tax are handled. The best choice depends on your GST registration, your accounting method and your accountant's advice.

• Chattel mortgage — you own the vehicle from day one and the lender takes a mortgage over it. If you are registered for GST, you can typically claim the GST on the purchase price in your next Business Activity Statement, and claim interest and depreciation over time.
• Commercial hire purchase (CHP) — the lender owns the vehicle and hires it to you until the final payment, at which point ownership transfers. Less common now than it once was, but still used in specific situations.
• Finance lease — the lender owns the vehicle and leases it to you; you claim the lease payments and there is a residual to deal with at the end. GST is charged on the rentals rather than the purchase.

GST, depreciation and the instant asset write-off

The reason businesses care so much about which product they use comes down to tax. Under a chattel mortgage, a GST-registered business generally claims the GST credit on the purchase price up front, then claims interest and depreciation as deductions. Under a finance lease, GST applies to each rental and the lease payments are deductible instead.

Depreciation limits and any instant asset write-off thresholds change from year to year and depend on your turnover and the type of vehicle, and passenger cars are subject to a depreciation cost limit. This page is general information, not tax advice. We work alongside your accountant so the finance structure matches the tax outcome you are actually entitled to.

Balloon payments and cash flow

Commercial finance often uses a balloon (residual) to keep monthly costs down while a vehicle is generating income. The example below shows a typical chattel mortgage structure, with a residual lump sum due at the end of the term that you refinance, pay out, or settle by selling the vehicle.

That example is illustrative only — not a quote or an offer of finance — and assumes a fixed rate for demonstration. Your rate depends on your business profile, time in business, GST registration, the asset and the lender. A balloon is a cash-flow tool: it frees up money while the asset earns, but it must be planned for, because the residual is real money owed at the end.

What lenders look at

Commercial lenders weigh the strength and age of the business as much as the individual. Time trading under your ABN, GST registration, the type of asset and whether the directors own property all feed into both eligibility and rate. Newer businesses and non-property-owners are not shut out — there are lenders that specialise in exactly those profiles — but the panel that fits you narrows, which is precisely where a broker earns their keep.

• Time in business and ABN/GST history
• Asset type, age and whether it is a standard or specialised vehicle
• Director property ownership (affects rate and maximum loan for many lenders)
• Whether documentation is full doc or low doc