Accounting and Tax Basics for Small Business Owners

Welcome to my blog! My name is Katrina, and a few years ago, I opened my own business. Unfortunately, due to really innocent errors on my part, I ended up with a huge tax bill – it was so unwieldy I had to shutter my business. However, I learned a lot from that experience. I took classes and read as many books as I could find on accounting and finances, and I spent a lot of time reading info from the taxation office's website. As a result of that diligence, I was able to open another business, and I take care of the accounting on my own practically perfectly. If you own a small business or are thinking about opening one, this blog is for you. Please explore and learn.

A Beginner's Guide To Car Loans


Buying a car can be a major financial commitment, and taking out a loan can be the best way to go about financing your new wheels if you don't have cash available.  But how does a car loan work, and what are the advantages and disadvantages?  Read on to find out more.

How do car loans work?

car loan is simply a loan taken out solely to finance the purchase of a car.  You choose how much you want to borrow and decide over what term you want to repay it.  You could choose to repay your loan over three years or perhaps over five; shorter or longer terms may also be available depending what contracts can be sourced by your finance broker.

The amount of interest you'll pay on your car loan usually varies depending on the amount you've borrowed, and is calculated using a graduated tier system.  Generally speaking, the more you borrow, the lower the interest rate you'll pay.  For this reason, it could be more cost-effective to borrow a little more to tip your loan amount into the next tier up, so that you'll pay less interest.  However, always make sure that you're able to comfortably afford the repayments each month, and don't overstretch yourself.

Before you apply for a car loan, it is well-worth checking your credit rating through one of the main credit reference agencies such as Experian.  This is because you'll get a much better loan deal if your credit rating is good.  If your credit rating is less than perfect, don't despair.  There are companies who specialise in providing finance for people with poor credit scores, and your finance broker will be able to research this option for you.

Pros and cons of car loans

One big advantage of buying a car through a car loan is that, once you've parted with the cash and driven the car away, it's yours.  This makes a loan a better option that an HP (hire purchase) agreement where you are basically just 'hiring' the vehicle for the duration of that agreement.  You won't actually own the car until you've made the final payment.  This means that you can't legally sell the vehicle if you run into financial problems and can't make the repayments.

Perhaps the biggest disadvantage of car loans is the material depreciation factor.  Because cars depreciate in value so quickly, you'll probably find that your vehicle ends up being worth a fraction of what you paid for it originally.  This makes a loan an unattractive option for people who prefer to change their car regularly.  If this sounds like you, leasing may be a better option.

It's also worth remembering that if you choose to repay your loan over a longer term, you'll be paying much more interest overall.

In conclusion

If you want to buy a car but don't have ready cash available, a car loan might be a good option for you.  Have a chat with your finance broker who will be able to source a suitable loan for you, and advise you on alternatives.


2 December 2015