Business vs. Personal Vehicle Loans: What to Know

If you’re self-employed or run a small business, you’ve likely asked this question:

“Should I finance this truck or van through my business—or just buy it personally?”

Whether you're a tradesperson, courier, contractor, or field service operator, the vehicle you drive is part of your business—and choosing the right financing approach matters.

In this guide, we’ll explain:

• The difference between business and personal vehicle loans
• When to consider financing in your business name
• Tax benefits and insurance implications
• Approval requirements and what lenders look for
• A real-world example that shows the financial impact

What’s the Difference Between Personal and Business Vehicle Financing?

Let’s start with a basic comparison:

When Does Business Vehicle Financing Make Sense?

Financing through your business is usually the better option when:

• The vehicle is used primarily for work
• You want to write off lease or interest payments
• You plan to use the vehicle for client delivery, transport, or job sites
• You want to build business credit
• You’re purchasing more than one vehicle for a fleet

Example: A courier with 85% business use would benefit from commercial financing, while a freelancer who sometimes visits clients might stick with a personal loan.

Tax Benefits of Commercial Vehicle Financing

✅ Deductible Interest or Lease Payments

Interest on a commercial loan or monthly lease payments can often be written off as a business expense.*

✅ Depreciation (CCA)

You can claim Capital Cost Allowance (CCA) to reduce your taxable business income based on the vehicle's depreciation.

✅ HST/GST Input Tax Credits

If registered for HST/GST, you may claim a portion of the tax paid on the vehicle or lease.

Note: Speak with your accountant about the percentage of business use and how best to document it for CRA purposes.

Insurance Differences: Personal vs. Commercial Policies

A personal auto policy typically won’t cover you if the vehicle is used heavily for commercial purposes—especially for delivery, cargo, or passenger transport.

Commercial policies offer:

• Coverage for business use
• Higher liability protection
• Fleet policy bundling
• Proof required for many business loan approvals

Always inform your insurance provider of the actual use to avoid future claims issues.

What You’ll Need for a Business Vehicle Loan

If you decide to finance through your business, be prepared with:

✅ Business number (BN) or incorporation docs
✅ Vendor quote or bill of sale (dealer or private)
✅ 3–6 months of business banking history
✅ Driver’s license and personal ID
✅ Good credit score (typically 600+, personal or corporate)

Explore:
Equipment Loans & Leasing
Refinancing & Leaseback

Real Case Study: Ontario Contractor Chooses Business Lease

Owner: Self-employed plumber with 2-year-old sole proprietorship
Vehicle: 2021 Ford Transit (used) from a local dealer
Decision:
Chose a commercial lease through Mehmi vs. a personal bank loan

Terms:

• 48-month term
• $0 down
• $750/month
• Full interest and lease payments deductible

Outcome:
Saved ~$6,800 in tax deductions over 4 years.
Easier to qualify for second vehicle lease 18 months later due to established business credit file.

FAQs: Financing a Business Vehicle in Canada

Can I finance used or private-sale vehicles through my business?
Yes. Mehmi supports both dealer and private transactions, as long as documentation and vehicle condition are verifiable.

Can I buy the vehicle personally and still use it for business?
Yes, but you’ll only be able to write off the portion used for work—and your insurance must reflect business use.

What if my business is new or has no credit yet?
We may still approve based on your personal credit, bank activity, and projected revenue.

Is it easier to finance personally?
Sometimes—but it comes at the cost of lower tax benefits and less separation between personal and business liability.

Final Word: Separate Smart, Save More

Choosing between personal and business financing isn’t just about paperwork—it’s about setting up your business to grow, protect assets, and reduce tax burden.

If your vehicle is a core part of operations, financing through your business can unlock greater benefits and flexibility in the long run.

At Mehmi, we help you compare both paths, assess monthly affordability, and guide you toward the best-fit approval for your situation.

Thinking about financing a vehicle for your business?
Speak to a credit analyst or use our calculator to map out commercial terms and compare them to personal options.

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