Many Australians have already experienced the skyrocketing costs of buying a car during the pandemic. Prices on both new and used vehicles are still stubbornly high because of global supply issues, which allow dealerships to charge a premium on available vehicles.

For small business owners in particular, it’s a heavy cost not everyone can afford.

The pressure on the market, unmet demand and long delivery times have left more turning to secondhand cars instead, or worse, relying on high-interest rate loans that add to the financial squeeze.

While prices are expected to start dropping at the end of 2022, driving down the costs of buying a car is something every business owner can enjoy. So if you’re looking to upgrade, there are ways to get a better deal – and here’s how.

1. Electric cars can be a cheaper option

With the rising costs of fuel and curbing climate change becoming key motivators to switch to electric, discounts on loan rates for lower fuel vehicles are helping offset the initial cost of buying green.

The main challenge with green cars – cars that produce little to no emissions – has traditionally been the price. But in recent times this has begun to change.

“In the past, electric vehicles have been more expensive upfront than their gasoline counterparts, which for many businesses has been a dealbreaker,” says William Brown, co-founder of Australian car loan platform Driva.

“Now, electric cars are the cheapest long-term option for most drivers, with no fuel costs and lower maintenance spurring the savings. There’s also been a dramatic decrease in new vehicle pricing with the cheapest electric vehicles (EVs) in Australia going for just over $40k which is quite an accessible market entry point.

“If you own a small business and are looking to upgrade a fleet of light vehicles or a new daily driver then it’s definitely worth considering.”

William Brown is the co-founder of Australian car loan digital platform Driva. Image: Supplied.

2. Prioritise fuel and maintenance efficiency

It’s important to think beyond the purchasing price of your desired car.

In today’s high fuel cost environment, more drivers are prioritising fuel efficiency. High operating costs are also a top challenge for small business owners when buying a new set of wheels.

Check the car’s fuel efficiency and weigh up your driving schedule to plan your budget. Cars clocking higher kilometres will cost more to maintain over time.

“You’ll also need to account for the ongoing costs including insurance, roadside assistance, registration, repairs, servicing and weekly petrol. With the average monthly cost in 2020 of owning a small car at $928.64 and a 4WD wagon at $1,804.61, these expenses can add up to significant amounts over the vehicle lifetime impacting your cash flow,” says William.

One of the benefits of making the switch to a green car is the savings in fuel and ongoing maintenance. EVs cost less to maintain than petrol-fuelled alternatives and rely on an electric charge to avoid the fluctuating price of petrol and diesel.

3. Be smart about your finance

Have you got the right loan for your cash flow and business? You can save thousands by refinancing your car loan, as well as reduce your interest rate and improve your credit score.

It’s also a good idea to apply for a business car loan.

“By choosing to apply for a business car loan, as opposed to an initial lump sum payment, you can enjoy the benefits that come with owning a car, while spreading out the cost of that vehicle over a longer period of time, easing your small business cash flow,” William advises.

When you use Driva as a platform to refinance, you access personalised rates and can get pre-approved online in 60 seconds.

Driva differs from traditional ways of obtaining finance by tailoring options to your specific needs. The platform matches your profile against thousands of lenders and policies to find the best one for you, without impacting your credit score, locking you into high dealership rates or chewing into your precious time.

Another way to save money is through green finance.

Green car loans are different from standard car loans because they generally come with lower interest rates. Some lenders offer these discounts to encourage drivers to reduce their carbon footprint. The rate varies between lenders and can come with other incentives too, such as waiving establishment fees.

Driva compares loan rates from more than 30 lenders. Image: Supplied.

4. Find the most tax-effective way to buy

Different financing options offer different tax benefits. For example, if you use a finance lease for a commercial car, you can unlock tax deductions on lease payments and claim GST on a monthly basis, if registered for GST. Another option is a novated lease, which reduces your taxable income and increases your take-home pay via a salary package arrangement.

Remember, timing is everything too.

“Dealers are more focused on sales goals or clearing existing model-year stocks in May and June (end of financial year) and November and December, when purchasing a new car is most attractive. If you buy around these times, you’ll most likely get a better deal,” says William.

Depending on where you live, there are tax and government incentives you can make the most of if you’re considering an electric car.

William explains: “Benefits include stamp duty exemptions, rebates, free public charging stations and registration fee discounts. All states except WA currently offer some form of incentive.

“From a national point, fuel-efficient vehicles attract less Luxury Car Tax too. This tax is levied at 33c on each dollar above a certain threshold, for most cars the threshold is $69,152. For fuel-efficient vehicles, it’s $79,659. This leads to savings of over $3000 on a new EV purchase.”

5. Claim an instant tax break

Tax deductions, applicable for work-related expenses, help reduce your taxable income. If you’re a sole trader or business, you can claim immediate deductions for the full cost of qualifying depreciating assets under the instant asset write-off scheme. To qualify, the asset cost must be below $150k with an annual turnover under $500 million.

“The instant asset write-off scheme does not apply to assets that you start to hold and first use (for a taxable purpose) from 6 October 2020 to 30 June 2022. Instead, you must deduct the business portion of the cost of the asset under temporary full expensing,” explains William.

“This removes the purchasing limit and allows businesses with a turnover of up to $5 billion to claim part or all the cost of work-related assets like a new ride until June 30 2022.”

Whether you choose a green car loan or not though, you can save money by doing your homework and comparing rates that take into account the vehicle’s age and your personal circumstances.

Ready to compare some competitive rates? Head to Driva.com.au to find the right new and used commercial vehicle car loan rate for you.

This article is brought to you by Kochie’s Business Builders in partnership with Driva.

Feature image: AdobeStock