6 Best Business Auto Loans of 2023

5. Crest Capital

• The vehicle is for business purposes. Small-business owners’ personal and professional lives often blur, but business auto loans are meant for company use. When you apply, the lender will likely ask how you’ll use the vehicle and you may need to provide documentation like a business plan or company financial statements.
• The vehicle can be in your business’s name. For qualified borrowers, some lenders will let you put a business auto loan in your company’s name only. This can protect your personal credit or assets should your business be unable to repay the debt. In other instances, you’ll need to provide a personal guarantee for the loan as collateral.
• Potential tax deductions are available. If you buy or lease a business vehicle, you can deduct its ownership and operation costs. Owners can also deduct a car’s depreciation. There are multiple ways to do this; section 179 of the tax code allows the entire deduction all at once, though that amount varies based on factors such as vehicle type and when it was placed in service.

1. Find the right vehicle. This means not only the type of vehicle that fits your business’s needs, but also one a lender will approve. For example, if you want to finance a used car, many lenders will have specific mileage limits and won’t approve a vehicle that’s more than five years old due to the depreciation.
2. Compare offers. If your company has a relationship with a financial institution, it can make sense to see if it offers business auto loans. But as with other types of business loans, you may pay less by shopping around. Look at a lender’s APR and details like how much you can finance. If it’s less than 100% of the vehicle’s total cost — don’t forget expenses like taxes and registration — you’ll need more cash on hand.
3. Apply with a lender. Lenders will have different application procedures. The process may be time-consuming and require paperwork like a business license, business tax ID and information about all the business’s owners. If you’re in a rush, alternative lenders may offer a more streamlined application process, but also more expensive loans.

• You need to free up cash flow. If you’re worried about fitting a car’s costs into your operating budget, auto lease payments are often lower than loan payments. You may also be able to spread the sales tax over the repayment term, depending on where you live. But you could pay more in insurance, and overall, for a lease.
• You don’t want to be stuck with a car. If having the latest car model is important to your business, a lease gives you the opportunity to switch to a new car at the end of your term You also have options to get out of a car lease — like swapping it for a new one — if the vehicle doesn’t end up fitting your company’s needs.
• You know how you’ll use the car. Your lease agreement will dictate what you can do with the vehicle, both in terms of how many miles you can drive and whether you do simple modifications, like wrap the outside. If you plan to substantially upfit the car, or run it into the ground, buying may be the better option

• Small-business loans. You could use funds from a term loan, SBA loan or business line of credit to finance a company car. However, tying up other available working capital like this in a vehicle may not make sense depending on your business’s other needs.
• Consumer auto loan. If you can’t qualify for a business auto loan or your vehicle will be driven more for personal use, consider a consumer auto loan. This won’t come with benefits like building business credit, but personal auto loans are widely available, even if you have bad credit.
• Personal business loan. You can typically use the proceeds from a personal business loan on whatever your company needs — including vehicles. But these loans will likely be more expensive than any other business auto loan option, making them a last resort for financing a vehicle purchase.