Financing a van or truck is rarely just about the monthly payment. The right agreement depends on how hard the vehicle will work, how long you plan to keep it and who will look after it. Answer those questions before you request quotes.
This guide takes a practical view of financing commercial vehicles. For a general explanation of each agreement type, see how does asset finance work.
Start with how the vehicle will work
Before looking at finance, write down how the vehicle will be used. This shapes almost every later decision.
- Mileage. Estimate how far it will travel each year, based on current routes or the contract it will serve.
- Duty cycle. Short urban drops, long motorway runs and heavy site work all wear vehicles differently.
- Holding period. Decide whether you expect to run the vehicle into the ground or replace it on a regular cycle.
- Body and equipment. Racking, tail lifts, refrigeration units, tipper bodies and other conversions add cost and may affect resale value.
A vehicle you will keep for many years and modify heavily points towards a different agreement than one you expect to hand back after a fixed term.
Own it or hand it back
For commercial vehicles, the practical choice usually comes down to two routes.
Agreements that lead to ownership, such as hire purchase, suit businesses that want the vehicle on their books, plan to keep it for a long time or need to fit it out to their own specification. You are typically responsible for maintenance, and the vehicle's value at the end is yours to realise.
Agreements where you hand the vehicle back, such as contract hire, suit businesses that want predictable costs and regular replacement. The provider takes the risk on the vehicle's value at the end, but you agree to usage and condition terms in return.
A finance lease sits between the two and can suit some fleets. Comparing quotes on both routes for the same vehicle can show the trade-offs clearly.
Want to know which options may suit your business?
New or used
New vehicles come with manufacturer warranties, the latest specification and, often, a clearer view of running costs. They also cost more upfront.
Used vehicles can reduce the amount you need to finance and may be available sooner. Providers will usually want details of age, mileage, condition and service history, and some set limits on vehicle age at the start or end of an agreement. Clear documentation from the seller can make a used vehicle easier to finance.
What to prepare before you apply
Having the following ready can help a provider assess the request:
- a written supplier quote showing the price, VAT, extras and expected delivery
- the full specification, including any body build or conversion and who is supplying it
- for used vehicles, the registration, mileage and service history
- how the vehicle will be used and, where relevant, the contract it will support
- recent accounts, business bank statements and details of existing finance agreements
- your operator's licence details, if the vehicles you run require one
Our guide to documents needed for a business loan covers the business information providers commonly request.
Mileage, maintenance and end-of-term terms
These details often matter more over the life of the agreement than small differences in the regular payment.
Mileage terms. Contract hire and some leases set an agreed annual mileage, with charges for excess miles. Set it realistically. Underestimating to reduce the payment can lead to charges at the end.
Condition on return. Vehicles you hand back are usually inspected against fair wear and tear standards. Damage, missing equipment or heavy wear can lead to charges. Ask for the return standards before you sign.
Maintenance. Some agreements include servicing, tyres and repairs. Others leave it to you. Check what is covered, how breakdowns are handled and whether a replacement vehicle is provided while yours is off the road.
End-of-term options. Depending on the agreement, you may own the vehicle, pay a final balloon, refinance, extend the agreement, or return it and take a new one. Confirm what each option involves and what early settlement would cost.
VAT and tax treatment on commercial vehicles depends on the agreement and your circumstances, so speak to your accountant. A commercial finance intermediary such as Emirex Finance can help you compare asset finance options, including for transport and haulage businesses.
Key points
- Define mileage, duty cycle, holding period and body build before requesting quotes.
- Choose between owning the vehicle and handing it back based on how long you will keep it.
- Prepare a detailed quote, specification and usage information to support the application.
- Check mileage, condition, maintenance and end-of-term terms as closely as the payment.
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This guide is general information, not financial, legal or tax advice. Finance is subject to status, eligibility and approval by the relevant finance provider. Emirex Finance works with UK limited companies only and is not authorised or regulated by the FCA.