How to choose the right car loan for your NZ SME

Do you need a new vehicle for your business? We'll tell you how.

Are you a small or medium enterprise (SME) business owner or sole trader looking to branch out and invest in a company vehicle? Securing the right SME car loan is an important consideration for any New Zealand business, impacting financial flexibility and operational efficiency. From understanding the repayment options to evaluating interest rates, we’ve highlighted the information you need to help you choose a small business car loan that aligns with your strategy and growth plans.

Understanding your business needs

Transportation requirements

When considering your SME’s transportation requirements, determine the purpose and necessity of the vehicle for your business operations – Whether it’s for deliveries, client meetings, or transportation of goods, it’s important to clarify the vehicle’s role. Next, consider the vehicle type and choose a vehicle that suits your business needs. Think about the size, capacity and features that are essential for your operations. E.g. An EV vehicle to reduce fuel costs may be best suited to a sales person driving daily in city traffic.

Budget and cash flow

When choosing the appropriate SME car loan, ensure you factor in the upfront costs, including any required deposits or associated fees, which can affect your liquidity. It’s important to make sure your monthly loan repayments are manageable and within your business’s budget.

Evaluate:

Resale value – Consider the vehicle’s resale value. Some vehicles depreciate slower than others, impacting long-term costs
Maintenance and repairs – Budget for regular maintenance (fuel, servicing and insurance), and potential repairs to avoid operational disruptions.

Thoroughly assessing these elements will help maintain a healthy cash flow, allowing your business to continue operating efficiently while managing new financial commitments from the vehicle loan.

Key Considerations for SMEs

Loan terms

Consider the length of the loan term. Shorter terms may have higher monthly payments but lower overall interest costs, while longer terms have lower monthly payments but higher total interest.

The ability to repay the loan early or refinance based on changing financial circumstances can offer significant advantages, including potential interest savings and better cash flow management.

Eligibility requirements and documentation

During a car loan application, we require businesses to provide detailed financial statements and a review of the company’s credit history to assess their risk and financial health:

Business plan – A clear business plan explaining how the vehicle will enhance operations can support your loan application
Proof of income – Provide proof of your business income, such as tax returns, bank statements, and invoices
Legal documents – Have your business registration (NZ business number if you are a sole trader), licenses, and other legal documentation ready for review.

Collateral or security (in the form of the vehicle or other business assets) may be needed in addition to secure the loan.

Future planning and tax implications

When choosing the right vehicle for your business it’s important to look ahead, evaluate and consider the following:

Depreciation – Factor in vehicle depreciation (second-hand vehicles are subject to depreciation too), and its impact on your business going forward. For detailed information and the latest guidelines, visit the Inland Revenue Department (IRD) website on depreciation here.
Upgrade and maintenance – Plan for the vehicle’s long-term maintenance and eventual upgrade or replacement.
Deductions – Understand the tax implications, including potential deductions for interest payments and depreciation.
GST – Consider the impact of GST on the purchase and ongoing running costs of the vehicle.

Work with a lender you can trust

Oxford Finance provide secured business vehicle loans with varying interest rates depending on the loan type. Loan terms can range from 1 to 5 years, with flexibility to match the expected vehicle lifespan. We offer a personalised services and work closely with SMEs to understand their needs.