What is Commercial Vehicle Asset Finance and How Can it Help Your Business?

can and lorries with blue overlay and text reading Asset Finance for Commercial Vehicles

Asset Finance covers a wide spectrum of products that enables businesses to finance larger purchases. In this article we are going to look specifically at the finance options for commercial vehicles. Whether you need a car or a fleet of cars, vans, trucks or lorries, vehicles are a vital component of many businesses. However, the cost of commercial vehicles needs to be managed for efficient cash flow and expenditure; this is where commercial vehicle asset finance can help. 

What is Asset Finance for Commercial Vehicles?

Essentially asset finance is a way of borrowing the capital to make a large purchase. Whether a car or a lorry purchasing commercial vehicles is expensive and can cause cash flow issues within businesses if they are purchased outright with cash. The benefits of purchasing commercial vehicles through asset finance are:

  • Loan secured against the vehicle
  • Fixed repayments
  • Low deposit
  • Potential tax benefits
  • Ownership/lease options

By retaining cash within the business and spreading the payments, your cashflow will be more manageable and predictable helping to futureproof the financial stability of your business. Other benefits include allowing you to update your commercial vehicles more regularly saving on maintenance costs, and also potential loss of earnings due to breakdowns of older and less reliable vehicles. MC Commercial finance can help with all your asset finance needs as a dedicated business finance broker. 

Vehicle Finance Options

There are several different vehicle finance options each with their own benefits and drawbacks that we will explore.

  • Hire Purchase
  • Commercial Vehicle Hire Leasing
  • Contract Hire

Hire purchase enables you to purchase commercial vehicles as an asset of your business upon completion of all payments. However, the leasing options mean that your business will never take ownership of the vehicle. The benefits of this would include, built in opportunities to replace your commercial fleet regularly, which would reduce the need to pay for maintenance and breakdown costs associated with using older vehicles. 

Hire Purchase

Hire Purchase is the most well-known way of making larger purchases both in the business and personal finance world. Whether you are looking to purchase cars, vans, trucks or even a lorry, hire purchase could be used as a finance option. With an initial deposit that is usually 5-50% of the total cost, the remaining sum is paid for through the finance company. You take delivery of the vehicle and make fixed payments for the term of the loan, which is usually 12-60 months. The fixed payments comprise the sum owing plus interest charged at the agreed rate.  Upon completion of the final payment your business owns the vehicle as an asset. 

To summarise hire purchase for commercial vehicles:

  • Fixed repayments over a fixed term
  • Low deposit
  • Loan secured against the vehicle
  • Full ownership at end of repayment term

Commercial Vehicle Hire Leasing

Leasing is an increasingly popular way to own a vehicle both for business and personal use. When you lease a commercial vehicle, the vehicle will never be owned by your business, you are renting from the finance company for a fixed period. Benefits of commercial vehicle hire leasing include:

  • Fixed monthly repayments
  • Low deposit
  • Tax deductible
  • Flexible repayment structure
  • Rebate upon sale of vehicle

Vehicle leasing through commercial hire has higher monthly payments than contract hire as the payments are reflective of the whole value of the vehicle. However, once the contract has ended and the vehicle is sold an agreed percentage of the resale value is given back to the renter as a rebate. 

Contract Hire

Contract hire is also known as an operating lease and is suitable for larger companies that are VAT registered. The primary benefit of an operating lease for commercial vehicles is that VAT can be reclaimed on the purchase. Providing the vehicle is solely used for commercial purposes 100% VAT can be reclaimed saving a significant sum of money on monthly repayments. Other benefits on contract hire include:

  • Fixed monthly repayments
  • Low deposit
  • Road Fund Tax included in repayments
  • Maintenance costs can be included in repayments
  • Potential tax benefits
  • Residual value is taken into account

By leasing a vehicle, you lose the advantage of your business owning an asset.  However, the repayments may be substantially less than those of a hire purchase agreement; meaning that you may be able to invest in a higher specification vehicle for the same monthly repayment. As Road Tax is included, if you opt to also include maintenance costs business outgoings for commercial vehicles will be fixed throughout the period of the operating lease meaning increased cashflow certainty for your business.

Obtaining Commercial Vehicle Asset Finance

MC Commercial Finance is a broker with access to many different finance companies. We can provide information on asset finance and give examples of your options depending on the commercial vehicle you are looking to purchase. Our service will guide you through the process quickly and easily ensuring that you get the vehicle that your business needs in a timely manner and utilising a source of finance that suits the structure of your business. 

Contact us today to discuss the financing of your new commercial vehicle. Whether you are looking for one car or a fleet of vans we can help keep your business on the road with smart finance options.