How to finance a vehicle for a business

There are several different types of business vehicle financing that can help you buy a business car. Find out more about how you can apply for a car loan for business, and compare lenders and loan types to find the best business vehicle financing option for your unique set of needs.

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Can you finance a vehicle for a business?

Yes, there are unique business car loan options available in Canada. Business vehicle financing refers to borrowing options that can help you pay for the costs of a new car, truck, van or other vehicle for business use. Your business car loan options are similar to those of regular auto loans, but you might not have the same selection of lenders and may have to meet different eligibility requirements.

The type of auto financing that will work best for your business depends on a range of factors, including your company’s financial situation, taxation needs and whether you’ll use your new vehicle only for business or for personal use as well.

What are my business car loan options?

Your company has a number of business vehicle financing options to choose from:

Commercial vehicle loan

• How it works: Get a commercial vehicle loan with the vehicle as collateral (secured loan). The loan may also have no collateral (unsecured), depending on the lender and the vehicle.
• How much can I borrow: Commercial vehicle loans have high borrowing amounts, but how much you can borrow depends on personal factors, such as your credit score and income.
• How to apply: If you have a good credit score, you can apply through traditional financial institutions like credit unions and banks. If you have a bad credit score, alternative lenders are an option.
  

  Secured business loan

  • How it works: Get a business loan that is secured by an asset, such as your vehicle, equipment or property.
  • How much can I borrow: You’ll usually be able to borrow the full amount of your vehicle or close to it.
  • How to apply: You’ll need to find the business vehicle you want to buy and then apply for a secured business loan from a bank, an online lender or a dealership.
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  Product CAFBL	APR Range	Loan Amount	Loan Term	Minimum Revenue	Minimum Time in Business	Loans Offered	Broker Compliance
  Journey Capital Business Loan	8% – 29%	$5,000 - $300,000	4 - 24 months	$100,000/year	6+ months	Term Loan, Line of Credit, Merchant Cash Advance		To be eligible, you must have been in business for at least 6 months with a minimum annual gross revenue of $100,000. Journey Capital offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.	Go to siteMore Info Compare	loading Fetching your data...
  Merchant Growth Business Loan	12.99% – 39.99%	$5,000 – $800,000	6 – 24 months	$10,000 /month	6 months	Unsecured Term, Line of Credit, Merchant Cash Advance		To be eligible, you must have been in business for at least 6 months and have a minimum of $10,000 in monthly sales. Merchant Growth offers financing tailored to business needs. It specializes in providing capital based on future cash flows, but it also offers fixed solutions. Fill out an application within 5 minutes and get your funds within 24 hours.	Go to siteMore Info Compare	loading Fetching your data...
  Loans Canada Business Loan	6.99% - 46.96%	$500 - $500,000	3 - 60 months	over $10,000/month	9 months	Unsecured Term	Loans Canada is a loan search platform with access to multiple lenders. Applicants will be matched with a suitable lender based on credit history and borrowing requirements.	To be eligible, you must have been in business for at least 100 days, have a Canadian business bank account and show a minimum of $10,000 in monthly deposits ($120,000/year). Loans Canada connects Canadian small business owners to lenders offering financing up to $500,000. Complete one simple online application and get matched with your loan options.	Go to siteMore Info Compare	loading Fetching your data...

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  Unsecured business loan

  • How it works: This type of business car loan lets you borrow a lump sum of money to pay for your car, which you’ll then typically repay over 3-7 years. It does not involve collateral.
  • How much can I borrow: You may be able to borrow anywhere from $5,000 to $50,000, depending on what type of car you want and what your credit score is.
  • How to apply: You can contact any bank or online lender that seems like a good fit to fill out an application for business vehicle financing.

  Best business loans

  Business line of credit

  • How it works: You can use a business line of credit to access a revolving pool of funds to pay off all or part of your business car. You can also use this money to pay for repairs/maintenance after you buy your car.
  • How much can I borrow: You may be able to borrow anywhere from $1,000 to $50,000 through this type of business car financing, with an open-ended repayment period.
  • How to apply: You can apply for a business line of credit with most banks and online lenders. Find the best fit for your business and apply by filling out an application.

  Get a business line of credit to finance your business car

  Business car lease

  • How it works: You can use a business car lease to get a car without needing a car loan for business. You’ll make payments on it as if it were a loan, but you return the vehicle to the dealership at the end of your lease instead of owning it.
  • How much can I borrow: You may be able to get a lease for anywhere from $20,000 to $50,000 through this type of business vehicle financing.
  • How to apply: You can apply for a business lease with most dealerships. Find the best fit for your business and apply by filling out an application.

  Find out more about business car leasing

  Canada Small Business Financing Program (CSBFP) loans

  • How it works: CSBFP loans let you borrow a business car loan that’s backed by the Canadian government. This means that if you can’t pay back the loan for some reason, the Canadian government will assume and repay a portion of the debt you owe.
  • How much can I borrow: You may be eligible to borrow up to $350,000 to purchase a fleet of business vehicles.
  • How to apply: While CSBFP loans are backed by the government, you still apply for them through your bank or alternative lenders. You just need to speak to your provider for a CSBFP-specific application.

  Learn more about the Canada Small Business Financing Program

  Microloan

  • How it works: You may be able to access a smaller amount of funding with this lesser-known type of car loan for business.
  • How much can I borrow: Microloans can start as low as $1,000 and may go up to $10,000. They’re typically repaid over 3 months or more.
  • How to apply: Micro business car loans are typically available with credit unions or non-profit organizations. Two examples of these organizations are the Access Community Capital Fund and the Community Futures Network of Canada.

  Business microloans explained

  Heavy vehicle loans

  • How it works: This type of financing lets you borrow money specifically to pay for heavy equipment and as commercial truck financing in Canada.
  • How much can I borrow: You can borrow up to 80% of your truck or equipment’s value – sometimes more.
  • How to apply: You’ll want to find a piece of equipment to buy and approach your bank or alternative lender to fill out an application for an equipment loan.

  Asset-based loans

  • How it works: These loans let you use your business assets as collateral to secure the money you borrow to buy a new business car.
  • How much can I borrow: A lender may grant up to 90% of the face value of your assets to fund your business car loan.
  • How to apply: You can fill out an application with banks or online lenders specialized in secured loans.

  What is asset-based financing?

  Can I use a business car loan for my ride-sharing business?

  You can take advantage of a business car loan if you drive for a taxi company or you need to buy a car to offer ride-sharing services for companies such as Uber or Lyft. You’ll just need to make sure that the vehicle you buy meets the eligibility requirements for the ride-sharing service you want to work for.

  How to finance a vehicle for a business

  1. Choose the type of loan. Since there are many types of business vehicle financing options, the first thing you’ll need to do is decide which type of loan is right for you based on the type of vehicle you need and your business’s financial standing.
  2. Choose a lender. Compare different lenders for the type of business car loan you want to get. Look at features like APR, term length, security and overall cost to decide if it’s a good fit for your business.
  3. Apply for the loan. Fill out the loan application and submit any supporting documents, which may include a recent tax return, Trade Name Registration document or a Corporate Profile Report. Once you’re approved, you can purchase your business vehicle.

  Business car loans vs regular car loans: What’s the difference and what’s better?

  The difference between business car loans and traditional car loans is outlined below:

  Traditional car loans

  Traditional car loans for personal use are usually secured by the vehicle you want to buy. This means that your lender can repossess your vehicle if you fail to make your repayments. Your lender will also rely on your personal credit history and income to determine if you qualify.

  • Who are these loans best for: These loans are better for borrowers who plan to use the vehicle they buy primarily for personal use.

  Business car loans

  These loans are very similar to personal car loans but they require you to own a business. You’ll also typically need to meet eligibility criteria that relate directly to your business (such as having a certain business credit score or annual revenue).

  • Who are these loans best for: These loans may be a good fit for you if you use your vehicle primarily for your business, and you want to make it easier to claim tax deductions.

  Representative example: Anna gets a car loan for business

  Anna wants to get a business car loan to buy a vehicle for her well-established sales company. She finds a 2021 Honda Civic for $23,400 + 13% HST, for an overall cost of $26,442. She decides to take the plunge and applies for a business car loan with an online lender. This is what her loan will look like:

  Loan amount	$26,442.00
  Loan type	Business car loan
  Loan term	5 years
  Interest rate (APR)	8.40% ($6,031.48 over 5 years)
  Additional fees	4.00% origination fee ($1,057.68)
  Monthly payment	$541.22 per month
  Total loan cost	$32,473.48 + upfront fee of $1,057.68

  *The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.

  How can I find the best business vehicle financing for my needs?

  • Term. The length of the term for your business car loan will influence how much money you have to pay over time. Many financing options allow terms of between 2 and 7 years, so compare what’s on offer to find the option that best suits your budget and needs.
  • Interest rate. You can get business vehicle financing with fixed or variable interest rates. Fixed rates will stay the same for the duration of your business car loan while variable rates will fluctuate in line with rates set by the Bank of Canada.
  • Repayment options. Look for a business vehicle financing option that allows you to tailor your repayments to suit your budget. Some options offer fixed monthly repayments, which provide security, while others may allow you to choose a more flexible repayment schedule.
  • Tax requirements. Claiming the expense of buying a vehicle as a tax deduction varies greatly depending on which business vehicle financing option you choose. You may be able to write off depreciation deductions and vehicle maintenance/operation costs to offset your overall expenses.
  • Fees and charges. As with any financial product, it pays to familiarize yourself with any fees and charges attached to your business car loan. They may not seem like much at first, but these expenses can add up to a lot of money in the long run.

  Buying vs. leasing a vehicle for your business

  Buying a vehicle means you’ll own it once you’ve paid for it in full. Leasing means you can use the car for a fixed amount of time but you won’t own it at the end of your lease. Here’s how the two options stack up:

  	Buying a vehicle	Leasing a vehicle
  Typical initial cost	Down payment of around 10% to 20% of the cost of the vehicle.	Security deposit of the first month’s payment. (You may be able to make a larger down payment to reduce your monthly payments.)
  Ownership	Your business owns the car as soon as the paperwork is signed.	Your business can buy the car after your lease is up for a large balloon payment.
  Tax benefits	Your business can deduct part of what was paid to buy and use the vehicle. Learn more below.	Your business can deduct part of what was paid to lease and use the vehicle. Learn more below.
  Maintenance	Your business is responsible for maintenance costs.	You might be charged a fee if your car needs excessive maintenance once you’re done with it.

  Can I claim motor vehicle expenses with the CRA?

  You can write off your vehicle depreciation and costs to use and maintain your vehicle with the CRA on your taxes.

  1. Vehicle depreciation. Vehicle depreciation is the decrease in your vehicle’s value over time and is claimed on your business taxes as a “capital cost allowance.”
  2. Other costs associated with using and maintaining your vehicle, such as gas, repairs, mileage, insurance, car loan interest fees and licensing/registration fees, can be claimed as “motor vehicle expenses.”

  You can’t claim motor vehicle expenses fully with the CRA. Only a certain portion of your vehicle’s depreciation and expenses are claimable, except for parking fees and supplementary car insurance, which can be 100% claimed as motor vehicle expenses.

  Find out what business vehicle tax deductions you can write off

  Are there any risks involved with business vehicle financing?

  As with any financing option, one of the most important things to avoid is getting in over your head. Having debts pile up on top of one another can hurt your business, so make sure you can afford a business vehicle financing arrangement before you sign up.

  Another common pitfall is simply not understanding the range of business vehicle financing options available and selecting one that doesn’t suit your business’s needs and budget. Enlisting the services of an accountant can help.

  Where can I get more information?

  To find out more about financing a business car or other business expenses, check out our detailed guide on business loans. We’ll tell you about different types of loans, how to apply, the costs that may be involved, alternative financing options and more.

  Bottom line

  You have several options for business vehicle financing to choose from if you want to get a business car loan. Find out more about how each type of financing works, how much you can borrow and what you need to do to qualify.

  Frequently asked questions business car loans

  • How hard is it to get a car loan for business?

    That depends on factors such as your credit score and how long you've been in business. You may find it easier to qualify if you have a high credit score or a large annual revenue for your business. You may have more trouble if you have a low credit score or you have a new business that still makes a small revenue.

  • How can I check my business credit history?

    You can reach out to one of Canada's major credit bureaus, Equifax or TransUnion, to get a copy of your business credit report. Since it's not a legal requirement for credit bureaus to provide free credit reports to businesses, expect to pay a fee. Read our full guide to credit scores here to learn how it works and why it's important.

  • Can I use my business's funds to pay for my personal car?

    You can if you use your car for both business and personal use. However, you can't deduct any vehicle-related expenses for non-business use of the vehicle on your taxes. Only expenses related to earning income can be claimed on your business tax forms.

  • What are the best vehicles to get for my business?

    The best vehicle for your business will depend on how you need to use it, so think carefully about that as well as your budget before making your choice. Some standout business vehicles include the Ford Super Duty F-450 if your priority is towing capacity, or the Toyota Sienna if you need a van with large storage capacity.