Business Car Finance
If you run a business that requires the use of vehicles, like a courier service, or you want to provide company cars for your employees, you will need to find some way of financing the purchase. It is unlikely that you will have enough available capital to buy cars outright, especially if you are investing in a fleet of vehicles, so you will need some form of business car finance. There are a lot of different types of asset finance that cover vehicles, so it is important that you spend some time exploring each and weighing up the pros and cons.
What is a vehicle loan?
A vehicle loan is a short term loan, usually secured against the vehicle that you are buying. This is the standard option for individuals when they buy a car, and it is applicable to businesses as well.
Applying for a vehicle loan is a quick and easy process that can usually be completed online, and you will get a range of different options for payment terms. The interest rates are relatively reasonable as the loan is secured against the vehicle. However, loans from dealerships tend to have a higher interest rate, so make sure to shop around.
There are options for unsecured car finance loans available, but the interest rates on these loans will be high.
What is a hire purchase?
A hire purchase agreement is a car finance deal whereby the lender buys the vehicle outright and then sells it on to you. You will pay an initial deposit and then pay instalments over an agreed period. You can either pay the full amount in equal instalments or pay lower instalments for the majority of the term and then pay a larger balloon payment at the end. The balloon option allows you to make lower payments but you pay more interest overall.
At the end of the agreement, once the full balance has been paid, you will own the vehicle.
What is an operating lease?
An operating lease is a more expensive form of asset finance, but it offers more flexibility than other options. The lender will purchase the vehicle on your behalf and rent it out to you, but you will not own the car at the end of the payment period. Instead, you will have the option of regular upgrades. This is a big benefit because you will not be stuck with an outdated vehicle that no longer suits your business needs. Many lease agreements also cover maintenance, and the cost of this will be built into your agreement.
There are other options for car finance, like unsecured business loans or lines of credit, but these are the main funding avenues that are available to your business. Always make sure to weigh up the pros and cons of each before making your decision.