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Vehicle finance is a form of lending that helps you purchase a business vehicle or fleet of vehicles without using up valuable capital. You spread the cost over a fixed period whilst having full use of the asset(s) during this time.
You can use this type of funding to buy a range of commercial vehicles including cars, vans, buses, and trucks. Some forms of vehicle finance agreements build in ownership at the end of the contract, whilst others allow you to lease with flexible options when the lease term ends.
If your business relies on cars, vans, buses, or trucks to operate, purchasing them through a finance deal is typically the only realistic way to invest. So what forms of vehicle finance agreements might be available to you?
Various types of vehicle finance are available, which means you can tailor the funding to suit your specific commercial needs.
Hire purchase can be a good option if you are looking to own the vehicle at the end of the agreement. You pay an initial deposit, which is usually around 10 per cent, and then a series of fixed monthly instalments, typically for up to five years. Once the repayments have been made you can pay a final fee to own the vehicle outright, if that is what you want.
A finance lease allows you unlimited use of the vehicle(s) and at the end of the lease, you have several choices. You can typically extend a finance lease for a further term, upgrade the vehicle, or change to a different model. Alternatively, you might want to hand the vehicle back if it has served its purpose.
You can release working capital tied up in a vehicle you already own, with no disruption to usage – a process known as vehicle refinancing. This involves selling the vehicle to the financier, and they rent it back to you with full usage rights. Once the agreement ends you become the owner of the vehicle again.
A range of benefits makes vehicle finance an attractive option for businesses:
Cash flow is protected
Funding commercial vehicles by monthly instalments spreads the cost of expensive assets, commonly for a period of up to five years. It safeguards cash flow and preserves business capital.
Budgeting is easier
Monthly instalments are fixed, which makes budgeting easier. You do not have to worry about changing interest rates, and longer-term strategic plans can be made with greater confidence.
Funding options are flexible
A range of flexible vehicle finance options is available so you can choose a finance arrangement that works for your business model and future plans. Tailor the plan to your commercial needs.
There are potential tax advantages
There may be tax benefits and allowances available when taking out vehicle finance, depending on the type of vehicle finance you choose and your own circumstances. Payments may be tax deductible, for example, or capital allowances/grants might be available in some situations.
We can help you find the right type of vehicle finance for your business. UK Business Finance are commercial finance brokers offering free, no-obligation services. We search the whole of the market to find you the best deals, and also offer quotes for adverse credit.
We will make an application on your behalf and support you throughout the process, ensuring you have the best chance of a successful outcome.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
Can I refinance existing business borrowing?
Most companies will have at least some outstanding borrowing, whether that is in the form of business loans, an overdraft, or a type of asset-based lending.
What are my options if my bank has refused my company finance?
When looking for funding to kick start or grow your company, many business owners’ first instinct is to turn to their bank in order to secure this borrowing.
Understanding Revolving Business Credit: Overdrafts and Invoice Finance
Revolving business credit is a flexible line of funding which is available to a company to dip in and out of as and when it is needed.
What is the difference between capital and asset finance?
Capital finance is a broad term which encompasses a number of different commercial funding solutions, including fixed term loans, invoice financing, and overdrafts.