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Finance Guide: Vehicle Finance

Published on 19th April 2016 - Last update on 14th December 2019

The vast majority of small businesses need some type of vehicle – as a result, they are some of the most commonly financed assets, giving businesses looking for vehicle finance a wide range of options both in terms of lenders and the variety of loan products they provide.

Options for financing a commercial vehicle

When buying a vehicle (whether new or used), businesses have two main financing options: Hire Purchase or leases. Hire Purchase has the advantage of being an installment plan – after a deposit and an agreed number of payments, the business will own the vehicle outright. Leases are not a path to ownership of the vehicle – the business will make monthly payments for a certain period of time, but the vehicle will return to the owner. Leases can also be further divided into different types based on a number of criteria, including the length of time the vehicle will be needed.

Other options for financing a vehicle include personal loans and 0% credit cards, both of which can have lower rates than leases or hire purchase agreements. These methods, however, are better suited to smaller purchases – second-hand vehicles, for example. Businesses buying more expensive brand-new vehicles may find hire purchase or leases provide better terms.

Refinancing a vehicle is a form of asset-backed secured lending. This allows a business owner to raise funding using their vehicle as security, which gives them more favourable terms than unsecured loans that are riskier for lenders. Vehicles are just one of the many assets that can be used as security – businesses can also raise funds against machinery and property, among others.

Making sure you have the right finance for your business is complex and can often be confusing.

There are so many options that can seem very similar, but which when reviewed closely can be very different in terms of monthly payments, overall costs, up-front fees and terms and conditions.

If you’d like to talk to one of our Business Finance Specialists:

Call us on 020 3637 2455

Or email us on [email protected]

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Sarah Thornton

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