Should I use my personal car for business or finance a separate vehicle?

Deciding whether to stick with your personal car for work or to buy a dedicated business vehicle is something many small business owners grapple with. The truth is, each option has its perks and drawbacks, from upfront expenses and tax breaks to flexibility and record-keeping.

In this article, we lay out the key factors to consider, so you can make the best decision for your driving habits, finances, and business strategy.

Can I use my personal car for business?

Yes, with some record-keeping. You can claim deductions for business-related use, but you’ll need to track kilometres or maintain a logbook (more on this shortly).

What are the benefits of using my personal car for business?

• Lower upfront costs. Using a car you already own means no big upfront spend. You don’t have to dip into savings or take on a loan, a big perk if you’re just starting out or cash is tight.
• No extra insurance or rego. Your car is already registered, insured, and maintained. You may need to update your policy to cover business use, but any adjustments are usually  cheaper than setting up a brand-new vehicle.
• Tax benefits. You may be able to write off a significant portion of running costs—think fuel, servicing, and insurance—based on how much you use the car for work. Just remember to keep a log or records to make sure you don’t miss out.
• Less admin. Between dealer negotiations, fleet management and extra paperwork, buying and managing a separate business car requires time and effort. Sticking with your personal car keeps things simple.
• Flexibility. For businesses that don’t require heavy transport or courier tasks, a personal car can easily manage a mix of personal and work use.

What are the downsides?

• Limited tax deductions. You can only claim a part of your running costs based on how much you use the car for work. If you're on the road a lot, having a dedicated business vehicle could help you score bigger write-offs.
• Wear and tear. More business driving means more fuel, servicing, and general wear on your car. The result? Shorter lifespan or lower resale value than you’d expect.
• Insurance limitations. Personal car insurance usually only covers occasional business use. If your policy isn’t updated properly, you might end up underinsured or have a claim denied.
• Not ideal for heavy or specialised work. If your work involves hauling a lot of equipment or making regular deliveries, a personal car might not have the space and durability you need.
• Blurring personal and business use. Mixing work and personal trips can make expense tracking more complicated. To keep everything accurate for tax purposes, you need a solid system in place, like a logbook or mileage app.

How do tax deductions work if I use my personal car?

If you use your personal car for work, you can generally claim a tax deduction for the business-related portion of your driving. That’s why keeping good records is so important, because it’s what supports your claim if the ATO ever asks for evidence.

There are two methods you can use:

• The cents per kilometre method uses a fixed rate for each kilometre you travelled for work, with the current rate being 88 cents per kilometre [1]. One caveat is, you can only claim 5,000 work-related kilometres per car per income year, so it might not be the best option if you drive more than that for business.
• The logbook method allows you to claim the actual costs of running your car, based on the percentage of business-related use, which you determine by keeping a valid logbook for a continuous 12-week period.

Should I finance a separate car for my business?

If you’re on the road a lot for work, a dedicated business vehicle keeps things simple for taxes, GST, and record-keeping. Plus, it gives you the flexibility to upgrade, manage costs, and keep your personal car out of the mix.

What are the benefits of a business vehicle?

• Clearer tax deductions. Your work car is a business asset and that means more straightforward claims for running costs, depreciation and (where applicable) GST.
• Potential GST benefits. If you’re GST-registered and the car is used mainly for business, you may be able to claim GST credits on the purchase price (up to the car limit) and on ongoing expenses like fuel and servicing.
• Simpler record-keeping. Since the car is tied to your business, you don’t have to track every single trip as you’d have to with a personal vehicle. Less headaches and more time on your hands.
• Easier to finance or upgrade. With vehicle finance , you can buy a business car without the large upfront cost,  which can help manage cash flow. Plus, you can upgrade your vehicle as your needs change without dipping into your personal savings.
• Professional image. Turning up in a vehicle that’s clearly set up for work–think sign-written, fitted out, or purpose-built—can make you look more professional and credible. Always a nice perk.

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What are the potential drawbacks?

• Higher upfront and ongoing costs. Buying or leasing a vehicle through your business can be more expensive at first. Business loans can help manage this, but remember you’re also responsible for running costs like insurance, rego, servicing, and fuel, which can add up if you’re not prepared.
• Fringe Benefits Tax (FBT) implications. If you use your car for personal purposes, you could be liable for FBT, which can add complexity and extra costs to your tax.
• Depreciation and asset management. With business-owned vehicles, depreciation rules apply. You need to track depreciation properly and record the car in your accounting system. Otherwise, you could miss out on tax deductions or face errors in your balance sheet.
• Reduced personal flexibility. Unlike a personal car, you can’t use a business vehicle freely for personal trips without potential tax consequences. 

What are my vehicle financing options?

Business car loans come in different forms:

• Chattel mortgage. You own the car from the get-go and use it as collateral for the loan, so you don’t have to put existing assets at risk.
• Hire-purchase. You pay instalments over a set period to borrow the vehicle. Once you pay it off, it’s yours.
• Operating lease. The lender owns the car and you pay to use it over a set period of time, but you don’t own it and it doesn’t appear on your balance sheet. At the end, you return the vehicle (although you may have other options depending on your contract).
• Finance lease. The lender owns the car, you rent it for an agreed-upon period, and both the asset and liability generally sit on your balance sheet. You may be able to buy the car at the end of the term, though this isn’t always guaranteed.
• Novated lease. This is a three-way agreement between you, an employee, and a lender. Your staff can drive the car, while your business handles all running costs. This one’s mainly an employee benefit arrangement.

How do I decide which option is right for me?

Dedication whether to use your personal car for work or financing a dedicated business vehicle depends on how much you drive, your finances, and your long-term plans.

Use your personal car if:

• You only do a small amount of work-related driving.
• You want to steer clear of extra upfront costs and ongoing business admin.
• You’re comfortable tracking business kilometres and claiming deductions through the cents-per-kilometre or logbook method.

Finance a business vehicle if:

• You drive a lot for work or plan to expand your business.
• You want to keep personal and business use clearly (and easily) separated.
• You’d like to take advantage of business tax deductions, GST credits, or financing options.
• You want the flexibility to upgrade, lease, or manage the car as a business asset.