A Guide to Using a Credit Union for Business Auto Accounts 

Summary: Choosing between a secured and unsecured loan is crucial for business owners. Secured loans, backed by collateral, offer lower interest rates, while unsecured loans come without collateral but often have higher costs in the long run. If you’re looking to purchase a new or used car or specialized vehicle for your business, using a credit union for business auto accounts could be the way to go.

In this article, we’ll delve into this specialized lending product and how it can benefit small-business owners on the move.

Credit union for business accounts - CCCU in Las Vegas, NV

What are Business Auto Loans?

Also known as commercial auto loans, business auto loans allow business owners to finance the purchase of vehicles that will be put to use in day-to-day business operations. With an auto loan, you can get the right vehicle for the job while building credit, optimizing cash flow, and limiting personal liability. 

Types of Vehicles You Can Buy 

Business auto loans can enable you to purchase a wide range of vehicles, including:

  • Company cars, including executive sedans and other cars for driving to worksites and entertaining clients
  • Delivery vehicles, including vans and refrigerated trucks that can be outfitted to carry your specific products
  • Pickup trucks for transporting heavier loads and operating in construction sites or other rugged environments
  • Passenger vans or buses that can be used for shuttling large tour groups, service teams, or conference goers
  • Specialty vehicles, which run the gamut from cement mixers to food trucks and can be extensively customized 

Secured vs. Unsecured

Like personal loans, business auto loans are typically secured, which means that the borrower uses the vehicle itself as collateral for the loan. This is good news for newer businesses without an extensive credit history or other fixed assets to borrow from. But it also means that if you default on the loan, the lender has the right to repossess the vehicle.

Generally, secured loans come with lower interest rates, increased borrowing limits, and longer terms. Unsecured loans, on the other hand, don’t require collateral, but they often come with significantly higher costs.

Key Differences

One distinction between business and personal auto loans is that business lenders may require that you use the vehicle only for business purposes – like transporting goods, providing services, or visiting clients. If you value work-life flexibility, this could be a major drawback. But if you’re trying to keep your assets and finances separate, this could help you stay on the right track.

With a business auto loan, a vehicle can be registered under your personal name or your company’s name. Having the vehicle owned and registered by an official business entity (like a corporation or LLC) may limit your personal liability. However, depending on the legal structure of your business and the specifics of your loan agreement, a personal guarantee may be required. Consult your lender and insurer for details.

Potential Benefits

Financing a vehicle with a business auto loan can offer several advantages, including:

  • Separating your finances, which can help you streamline bookkeeping and tax filing while limiting your liability.
  • Building business credit, which is separate from your personal credit score and can facilitate future borrowing.
  • Conserving working capital for routine and emergency expenses instead of paying for the vehicle all at once.
  • Taking advantage of tax benefits like deductions for interest, depreciation, gas, tolls, insurance, and more.
  • Branding your vehicle or making other modifications that aren’t possible when you lease vehicles.
  • Driving without mileage limits or other restrictions on use that leased vehicles generally come with.
  • Owning the vehicle outright and being able to sell it, trade it in, or leverage its equity at any time you wish.

Making the Right Selection

Using a credit union for business accounts can be a smart solution for getting the vehicle your business needs right now while managing cash flow and risk. But like everything in business and in life, the answers are never one size fits all, and you’ll need to consider your specific needs, goals, and capacities. Our commercial team has worked with local businesses to ensure that they obtain the right loan, helping them achieve their business goals. For more information and personalized guidance on business auto loans and other lending solutions, contact our commercial team at 702-228-2228 or visit www.CCCULV.org.