A car title loan  is one of the basic forms of external financing that companies use. A car in a company is the basis, and also having it brings many benefits, including tax benefits. 

The most important thing in the loan is that the borrower remains the owner of the loaned vehicle throughout the loan period. The bank may only require the establishment of collateral in the form of a credited car or a blank promissory note.

Who Can Use a Business car title loan?

Outside companies, a car title loan is also available to individual customers, but most often it is taken out by natural persons with registered business activities.

In the case of a company, a car title loan is taken out by an enterprise, not an individual.

It is  a special purpose loan , which means that the loan funds should be used for the purpose indicated in the loan application, i.e. a company car. A company car purchased in a loan is included in the company’s assets, and thus entitles it to be shown in tax costs.

What are the tax benefits of a car title loan for companies?

The main benefit of  taking out a bank loan by companies  is the ability to show in tax deductible costs all fees related to the loan. Credit fees  included in costs are:

  • bank commissions
  • handling fees
  • loan activation fees
  • car insurance fees.

An important issue in recognizing the costs incurred is the deduction of credit interest. The loan  granted by the bank itself is not the basis for disclosure in costs, until the loan installment is paid, then the company has the option to deduct the interest part of the loan installment.

Who carries out depreciation write-offs for the car title loan?

As we know, the borrower is the owner of the credited vehicle. It happens that the security of the amount granted is established on the car.  The  owner of the vehicle carries out depreciation charges . In the case of a co-owner entered in the vehicle card, depreciation write-offs are carried out up to the share of the car owner.

Cars can be depreciated up to the initial value not exceeding PLN 20,000. euro . The exchange rate is converted as at the vehicle purchase date, based on the data provided by the National Bank of Poland. If the initial value of the car exceeds 20,000 euro, the entire initial value is subject to depreciation, but only the part not exceeding the upper limit can be shown in tax deductible costs.

A loan with redemption will provide a lower monthly installment 

Own contribution and a high final installment will necessarily ensure a competitive installment amount compared to traditional loans. We asked banks and loan companies in car dealerships of individual brands to calculate the standard loan offer and the loan offer with a buyback installment (if offered). 

The client was a married couple who earn a total of PLN 6,000 net per month under an employment contract and raise two children. They have no other credit obligations, and they repaid the previous ones on time. They estimated their monthly fixed expenses at PLN 2,000. They are interested in purchasing a new C-class passenger car for about PLN 70,000. 

They are ready to pay PLN 14,000 (20%) towards their own contribution, and they want to spread the loan over 3 years – they prefer to pay off half of the car in the last installment, but they can agree to other conditions. The criterion they use to select an offer is the amount of the monthly installment burden.