Vehicle Finance

 Compare the best business loans in one place.

It's 100% Free & No Paperwork.

Free process that won't affect your credit rating.

Vehicle Finance

 Compare the best business loans in one place.

It's 100% Free & No Paperwork.

Free process that won't affect your credit rating.

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 are the advantages and disadvantages?

Pros

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Simple and fast application process. 

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Flexibility with payment schedules. 

R

You own the vehicle and you may be able to claim a tax deduction for depreciation. 

R

You can claim deductions for your interest payments. 

Cons

Q

Asset financing from a car dealer is expensive. 

Q

The loan is recorded on your balance sheet, which impacts future borrowing capacity. 

Q

Vehicles can be repossessed if you fail to make payments. 

Q

If the loan is secured against the vehicle, you cannot dispose of the vehicle without permission. 

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 are the advantages and disadvantages?

Pros

R

You own the vehicle at the end of the payment period. 

R

Most lenders allow flexible payment terms. 

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You can claim a tax deduction for depreciation of the vehicle. 

Cons

Q

An upfront deposit is required. 

Q

Early termination fees will be charged if you need to cut the contract short for any reason. 

Q

You are responsible for maintenance even though you do not own the vehicle yet. 

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Usually more expensive than other car finance options. 

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. 

What are the advantages and disadvantages?

Pros

R

There is no debt to record on your balance sheet. 

R

Leasing offers more flexibility. 

R

Lease payments are usually tax deductible. 

Cons

Q

You do not own the vehicle at the end of the payment period. 

Q

You cannot claim tax deductions for depreciation. 

Q

An operating lease is the most expensive form of car finance, especially if maintenance is included. 

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.