Business vehicle finance in New Zealand

The short answer

When you finance a vehicle for your business, the lender asks two questions. Can the business afford the repayments, and what is the vehicle worth if it has to be sold? For a sole trader, contractor or small company, the first question is answered with paperwork: bank statements, tax records, GST returns where relevant and accounts.

Fair Finance is a referral service for vehicle loans, not a business finance adviser. This page explains what lenders tend to ask for and how to prepare, so you can talk to a lender or an accountant with the right documents in hand. For general proof-of-income rules, see our page on self-employed car loans.

Business loan or personal loan: why the purpose matters

Consumer Protection explains that the Credit Contracts and Consumer Finance Act (CCCFA) is aimed at personal borrowing. For lending where the credit is for commercial or investment purposes, the contract is not a consumer credit contract, and the protection that applies is against oppressive lender behaviour. Lenders may get a declaration from the customer about the purpose.

In practice that has three effects:

• You will be asked what the vehicle is for. Answer honestly. A wrong declaration can cause problems later.
• The checks may look different. Consumer lenders must make reasonable inquiries about affordability. Business lenders rely more on the business’s cash flow and records.
• Some protections that help consumer borrowers may not apply. Read the contract with that in mind and ask questions before you sign.

If a vehicle is partly private and partly business, tell the lender and your accountant, because the split can affect both the loan and the tax.

Who is borrowing: sole trader, contractor or company

Sole traders and contractors. You and the business are the same legal person. The lender will usually look at your personal credit file as well as your trading record. One broker guide says it is standard for a sole trader to back the loan personally, because they are assessed on both personal and business credit.

Small companies. The company is a separate legal entity, with its own record. For a new or small company, lenders may still look at the directors’ personal position, and may ask directors to back the loan personally. Ask the lender what it will require before you apply, and get legal advice if you are asked to put your own assets behind a company loan.

Contractors for a single client. If most of your income comes from one network or company, the lender may ask how long the contract runs. Our courier driver page shows how that plays out for a delivery contractor.

What lenders typically ask for

Requirements vary by lender and loan size, but broker guides commonly list:

• Bank statements. Three to six months is typical, and they are the main evidence of cash flow. Some lenders ask for two years on larger loans.
• Tax returns or financial statements. For larger loans, brokers say lenders want profit and loss statements, balance sheets or cash flow information.
• GST returns, if you are registered. They show turnover over time.
• ID and business details, such as your NZBN or company details.
• Trading history. Many lenders prefer 12 months or more, and a shorter record can narrow your options.
• Vehicle details. Make, model, age, kilometres, condition and price, and a copy of the dealer invoice or sale agreement.
• A logbook, where the vehicle has mixed private and business use. One guide mentions a typical 90-day record.
• Your other debts, business and personal.

None of this is a promise of approval. A lender may ask for more or less. Get a list from the lender before you collect everything.

Preparing your numbers

Bank statements are only helpful if they tell a clear story. Before you apply:

1. Separate business and personal accounts if you have not already. Mixed accounts are hard to read.
2. File your returns on time. An up-to-date GST and tax position reads better than a backlog.
3. Explain the lumps. Seasonal work, a big invoice or a gap between contracts is fine if you can show why.
4. Know your tax set-aside. Statements show money in, but part of it belongs to Inland Revenue. Lenders think about what is left after costs and tax.
5. Check your credit file. Business owners often have personal defaults they have forgotten. Our page on low credit score car finance covers what lenders see.

Loan, hire purchase or lease

Broker guides describe several structures. Fair Finance refers vehicle loans, and our pages on car leasing and novated leases cover those separately.

Structure	In plain terms
Secured vehicle loan	You borrow to buy the vehicle, it is the security, and you own it as you repay
Hire purchase	You pay in instalments and become the owner at the end
Finance lease	You pay to use the vehicle, usually without owning it at the end
Operating lease	Closer to rental, with no ownership and often no residual obligation

Which suits you depends on cash flow, how long you will keep the vehicle, how heavily it will be used and your tax position. This is an accountant’s question. Driveline, a leasing company, says leasing keeps working capital free. Brokers say a loan builds equity. Both statements serve the person selling the product, so get independent advice.

GST and tax: where to look

We cannot give tax advice. Inland Revenue is the authority on:

• Whether you must register for GST. The threshold is turnover of at least $60,000 in the last 12 months or expected in the next 12.
• Whether you can claim GST on a vehicle, and how private use changes the claim.
• Whether payments are deductible, which can depend on whether it is a loan, hire purchase or lease.

Start at the Inland Revenue GST pages and the business section of ird.govt.nz, then ask an accountant to apply the rules to your numbers. Business.govt.nz also advises getting professional advice on the tax effects of a loan or lease.

A worked example (illustrative numbers only)

Say a sole trader buys a used work van for $32,000 and finances all of it at an illustrative 12% a year.

Term	Weekly repayment	Total repaid
4 years	about $194	about $40,400
3 years	about $245	about $38,300

The loan is about $194 a week on the four-year term. Add fuel, insurance, servicing, registration and tools for the vehicle, say $170 a week, and the vehicle costs about $364 a week. If the business sets aside 25% of profit for tax, the vehicle needs to be supporting roughly $485 a week of extra profit before tax, simply to break even on its own cost. Lenders do this sum from your statements. The figures are invented, and the repayment calculator will test your own.

Red flags

• Pressure to sign before you have seen the written terms. Ask for the rate, all fees, term and total repayment.
• An unexplained balloon payment at the end of the term.
• A requirement to put your home or other assets behind the loan without independent advice.
• A purpose declaration you do not understand.
• Anyone who skips questions about your cash flow and promises approval.
• A vehicle priced well above what the business can support.

Cheaper alternatives

• A less expensive or older vehicle that does the same job.
• A bigger deposit, funded from cash flow over a few months.
• Hiring or leasing while the business is new and its income is unclear.
• A staged purchase: one vehicle now, a second when contracts are signed.

How Fair Finance helps

Fair Finance is a referral service, not a lender, a broker or an adviser, and we give no tax or business advice. For a vehicle bought in your own name, you complete one application, we run one soft credit check that does not affect your score, and we refer you to a panel of approved New Zealand lenders. Whether a lender will consider a vehicle used for work depends on the lender and the use, and nobody can promise approval. We are paid by the lender only if a loan settles, and that never changes your rate. The quick check is the place to start.

Checklist

• Purpose of the vehicle clear: private, business or mixed
• Three to six months of business bank statements
• Latest tax return and GST returns, if registered
• Accounts or profit and loss, for a larger loan
• Credit file checked for forgotten defaults
• Accountant asked about GST, deductions and structure
• Written offer showing rate, fees, term and total repayment

General information only, not financial or tax advice. Rules and thresholds change, so check the official pages below.

Sources

• Consumer Protection: Credit Contracts and Consumer Finance Act
• Consumer Protection: What lenders must do
• Inland Revenue: Registering for GST
• Inland Revenue: GST adjustments for mixed use assets
• Business.govt.nz: What to consider before you start contracting
• Fundr: Business vehicle finance NZ
• Quick Loans: Loan for a business vehicle