Getting a company car loan is pretty common. The only thing left is how to get approved and worrying if you can truly pay for the car loan that you just got.
To help you get started, here’s a list of tips that may help you when you plan on getting a car loan for your business.
Shop around
You shop around to get a good deal on your new vehicle, so why wouldn’t you shop around for the loan to pay for it? Most people don’t. They go to the dealer without doing any homework. Shopping around means you are making sure that you get the best deals out of the loan.
Limit your loan shopping to two weeks
Every time you apply for a business loan — whether you are approved, whether you use it — your business credit score goes down and it makes it slightly more difficult to get a prime-rate loan. But if you make all of your applications within a two-week period, they count it as only one inquiry.
Choose the shortest loan
As cars have become more expensive, car loans have gotten longer. You can now finance that new set of wheels for seven, eight or possibly nine years. The longer term reduces the monthly payment, but it will also drive up your total cost. There are some car loan calculator online that may help you with calculating your loan.
Avoid conditional financing
Never take a car from a dealer until the financing — down payment amount, interest rate, length of loan, monthly payments — is finalized. If the financing is “contingent” or “conditional,” they can change later and you could get stuck with less advantageous terms.
Beware of different finance scams
You sign all the paperwork, get the keys to your shiny new car and drive it to your office, assuming the deal is done. A few days or weeks later, someone from the dealership calls and says they were unable to get the financing approved at the agreed-upon price.
You must return the car to the dealership, they say, or negotiate a new loan at a higher interest rate. If you don’t, you could lose your deposit and trade-in, and you may even be charged a rental fee for the time you had the vehicle. You don’t want to face such situation, and your business simply can’t afford such mistake.
Understand your credit
The best rates you’ll see advertised online, in newspapers, or elsewhere often require that you have a top credit score. Your score will help determine the interest rate a lender will charge you (or whether you’ll be able to get an auto loan at all).
Your business credit standing is especially important with the recent mortgage crisis and associated economic problems, which have made getting a car loan more difficult. Not only do borrowers need higher minimum credit scores, they’re increasingly being asked to produce documents to substantiate their income and other information they provide on a loan application. So you better be ready in pulling out those much needed files.
Takeaway
Just like any other loans, taking a car loan for your business vehicle requires you to understand the pros and cons of it. One thing for sure, don’t let your purchase negatively impact your business cash flow.
Be sure to ask around or talk to your financial adviser about your decision.