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Author

Kyle Eaton

Editor

Lucinda O'Brien

Last updated

November 8th, 2024

Business vehicle finance deals

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What is business car finance?

Business car finance helps you borrow money to purchase new vehicles for your company.

Put simply, it means you can turn the up-front cost of buying a company car, van or other vehicle into a monthly cost.

Options include letting you lease the car for a period of time and pay towards the cost of the vehicle on a monthly basis, or taking a loan to outright buy the car and paying it back over time. There are several hybrid approaches of the two available as well.

Business car registrations (Jan-Sept 24)^[1]

33,123

How does business vehicle finance work?

There are a few options when it comes to getting finance for a business vehicle - especially a new one.

Plenty of manufacturers offer deals directly - including contract hire, hire purchase and full payout leasing.

Discounts and even 0% finance deals are sometimes possible when purchasing new vehicles direct from manufacturers - so it's an option worth checking out.

You can also go to a bank or other lender, general car dealer or specialist leasing firm to pick up a vehicle.

You also can get finance to buy a wide range of business vehicles, including:

Cars
Vans
Tractors
Buses/coaches
HGVs

Different types of business car loan

Your business hires a vehicle from the finance company for a set time and pays a fixed amount. Contract hire may come with an agreed mileage limit.

Your business hires a vehicle and has the option to buy it outright at the end of the term. You normally have to put down a deposit at the start and stay within a mileage limit.

Finance lease lets businesses hire a vehicle for a specific period, rather than outright, and make regular payments towards the cost of the vehicle. This also avoids a huge upfront cost for the business.

Your business borrows the cash and uses it to buy the vehicle up front, with no mileage restrictions or other conditions.

Pros and cons

Pros

There are some business vehicle loans that allow you to own the vehicle outright once you've paid off the loan. This can then be a valuable long-term asset for your business.

Business vehicle loans can have flexible terms to suit your business, including repayment schedules.

This type of loan can give the chance to own newer vehicles, so a business can have an up-to-date and efficient fleet.

Cons

As with all loans, your business will incur interest costs and these can add up.

Your business might need to provide an initial deposit to secure the vehicle loan.

Vehicles tend to depreciate in value over time. If the loan exceeds the rate of depreciation, the company may owe more on the loan than the vehicle is worth.

Green loans for electric vehicle finance

If you're planning to upgrade to an electric vehicle, you actually might find you can access a little more finance than otherwise.

That's because as well as being able to find finance for a new vehicle, you can access green loans too. These are offered by providers to businesses.

On top of that, there are a series of government grants and incentives to help the UK's transition to Net Zero.

You can see what support is available near you on the British Business Bank page for SMEs here.

“Businesses should always consider interest rates and the overall impact on cash flow before taking out a loan. However, when navigated correctly, business vehicle finance loans can improve fleets and enhance productivity.”

Kyle Eaton

SME expert

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FAQs

Do I have to put down a deposit?

You don't always have to put down a deposit. Some company car finance options require a 0% deposit, but they are more expensive.

Are there mileage restrictions?

There are sometimes mileage restrictions, depending on the company you choose.

Will I own the vehicle at the end of the finance agreement?

In terms of whether you'll own the vehicle at the end of the finance agreement, it depends on the finance agreement you choose. Some require you to pay a final lump sum payment to own the vehicle, so check this.

Will my business have to pass a credit check?

Yes, your business normally has to pass a business credit check and demonstrate that it can afford the finance agreement.

Can I use asset finance to fund my vehicle purchase?

Yes, you can use asset finance to fund a vehicle purchase. Asset finance is where the lender purchases your chosen vehicle on your behalf, then you pay them back.