Van Finance for Business - Loans & Leasing Solutions
Discover the financing solutions available to you and how your business can benefit
When it comes to financing a van, you will no doubt want to know all of the facts first - and rightly so. To help, we’ve put together a helpful guide about business van finance, where we explain the variety of loans and leasing solutions available to you.
In this article, we explain ways to finance a van, how to choose the right type of van finance, and how to get approved by lenders. Read on to find out more…
Types of financing
Van finance doesn’t come as a ‘one size fits all’ solution. Instead, there are a number of options available to you - and they work in slightly different ways. At Loads of Vans, we offer three main finance options to our new and existing customers. These are:
- Hire Purchase (HP)
- Contract Hire (CH)
- Finance Leasing
Each solution has its own benefits, but as with entering any kind of finance agreement, you must be aware of the terms and conditions too. Failure to keep up with repayments could result in your vehicles being repossessed by the lender, so it is vital you understand the advantages and disadvantages first - we explain more about this further down the article.
What is Hire Purchase?
Hire Purchase van finance (also known as HP for short), is a popular form of finance that allows you to spread the price of the vehicle across monthly payments for a set period of time.
The main benefit of Hire Purchase finance for you and your business is that you will eventually own the van, without the need to stump up a huge sum of cash in order to do so. Instead, you’ll be required to put down an initial deposit amount towards the vehicle, which will determine the amount you’ll need to borrow from the lender.
If a deposit isn’t possible, ‘no deposit’ - also known as ‘zero deposit’ deals are available, but aren’t necessarily readily advertised. However bear in mind that this option will mean you’ll likely pay higher monthly fees, for a longer period of time.
At the end of the agreement, you will have the option to purchase. To do so, you’ll need to pay an ‘option to purchase fee’ to become the official owner of the vehicle.
What you need to know about HP:
- A minimum deposit of 10% is usually required
- Hire Purchase deals tend to range from 12 months up to 60 months (five years)
- You are simply ‘hiring’ the vehicles until all the repayments have been made
- An ‘option to purchase fee’ is required at the end of the contract in order to own the vehicle (this is usually around £200)
- You can choose to give the vehicle back when all repayments have been made and begin a new deal
- You can hand the vehicle back part-way through the agreement if you’ve paid at least half of what it's worth
- There are no mileage restrictions during the term
Discover more about Hire Purchase loans and their perks for businesses on our page dedicated to the topic.
What is Contract Hire?
Contract Hire (also known as CH for short), is a way of driving vehicles for a long period of time without committing to full ownership. Because you won’t own the vehicle at the end of the agreement, Contract Hire options tend to be the most cost-effective solution for a sole trader or business owner.
Think of Contract Hire as a long-term rental solution for your business; you pay a monthly fee and get to enjoy driving new vehicles in the process. Typically, Contract Hire agreements last between two to five years so you’ll hand the vehicle back to the finance company at the end of the agreed term. This means that every few years, you will be able to enter into a new contract with the opportunity to drive the latest vans available on the market.
What you need to know about CH:
- The fixed-cost motoring model means you can budget accordingly
- An initial deposit is required - this is usually the equivalent of three monthly rental payments
- Maintenance and service plans are additional benefits for a small monthly fee
- The van’s road tax (also known as Vehicle Excise Duty - VED) is automatically renewed each year at no extra cost to you
- However, you will be restricted to an annual mileage agreement - surpassing this will result in extra fees charged on a pence-per-mile basis
Discover more about Contract Hire loans and their perks for businesses on our page dedicated to the topic.
What is Finance Leasing?
Unlike Hire Purchase or Contract Hire finance agreements, Van Finance Leasing is a more short-term fix for a business. If you’re looking for vans for a limited period of time, then this is an ideal option for you - plus, it may be possible to even earn money from the lease when the lender sells the vehicle.
If you’re a VAT-registered company, then a loan has its benefits - this is because you are essentially paying for the use of the vehicles all the time you need it, rather than paying towards eventual ownership, or its depreciation. This means that if the vehicle is sold for more than it was worth when you entered into the lease deal, you could reap the rewards!
What you need to know about FL:
- A great opportunity to drive the latest model of van
- You pay a minimum deposit of at least three months rental
- Monthly payments will be fixed during the agreed term
- Benefit from fixed interest rates
- Extend the lease period by up to 12 months if you wish
- You must keep it well maintained during the lease period
- Any equity made can be used as a deposit on your next vans
Discover more about Van Finance loans and their perks for businesses on our page dedicated to the topic.
How to choose the right type of loan or business finance
Which type of finance is the right solution for you and your business? Well, there are a number of key considerations here. To help you come to a decision, we’ve listed the top 10 questions to ask yourself:
- What is your current financial situation?
- How good is your credit score?
- Do you want to change your vans regularly?
- How long do you want to be tied into a contract?
- How much do you want to spend each month?
- How much upfront deposit can you afford to pay?
- Do you want to own the vans at the end of the agreement?
- Do you want to be limited to an annual mileage allowance?
- Are you prepared to pay an option to purchase fee at the end?
- Will you need a maintenance and service pack included?
Answering ‘yes’ or ‘no’ to these 10 key questions relating to van finance and your needs will help you establish what option will likely suit you best.
How to get funds for your Company:
Applying for van finance is one thing, but knowing if you’re eligible is another. As such, there are certain criteria you’ll need to meet first - in most cases, you’ll need to be 18 years of age or older to apply for van finance in the UK - and:
- Have lived in the UK for a minimum of 12 months
- Earn at least £1,000 a month
- Can be employed or self-employed
- Ideally, have a good credit score
- Own a driving licence
You can check your eligibility for a loan prior to applying, thanks to an online check with no impact on your credit score. This is known as a ‘soft credit check’ and is a great way of getting a quote prior to entering into an agreement. During the process, your credit report will be reviewed, but unlike a ‘hard’ credit check, it won’t affect your credit score.
If you don’t know what your current credit score is, then you can check this for free via one of the UK’s three main credit reference agencies - these are Equifax, Experian, and TransUnion.
What details do you need to provide:
When you’re ready to apply for van finance, there are a number of details you’ll need to provide to the lender. For your application to be thoroughly reviewed - and potentially approved - financial and personal information will need to be submitted. Some of the details you may be expected to share include:
- Full name (including any middle names)
- Date of birth
- Marital status
- Your address (details of a previous address may be asked for if you’ve not lived in the property for long)
- Utility bills to confirm proof of residence
- Your job role and place of work
- Your employer’s name and address (if applicable)
- Monthly and annual salary
- Payslips and bank statements (most likely from the last 3-6 months)
- Credit cards and existing finance agreements
Failure to submit any of the personal or financial information asked for by the lender could mean your application is declined. If this is the case, bear in mind that this might harm your credit score.
Loans for new businesses: How financing a van can help your business grow
When starting up a new business, the costs can easily spiral out of control. If you need a company van - or a fleet of vehicles - an ideal solution is to spread the cost through finance. To help steer you in the right direction, we’ve listed the 5 top benefits of a business loan:
1 - Manageable cash flow
Running a business requires management, including the monthly incomings and outgoings. Having a van on finance means you know exactly what money is coming out of your business account during the agreed term.
2 - Flexibility of terms
Van finance deals are designed to be flexible to suit your needs. Term length can vary from a minimum of 12 months all the way up to 60 months (five years) depending on the duration needed.
3 - Improved brand reputation
Starting a new business means you need to make a good impression - and as quickly as possible. Financing a new model - especially an electric one - will show clients that you care about how the company is perceived and strive to be the best at what you do.
4 - Tax deductible benefits
Depending on the type of finance you choose, there could be tax benefits involved. Finance Leasing and Contract Hire deals are usually tax-deductible, meaning that you can assign the cost as a business expense. Always speak to your accountant or a tax advisor first.
5 - Incentive for employees
If you’re employing staff who need a van to help with their job, then providing them with that vehicle is an attractive offer - especially as they will likely receive a new model every 2 to 3 years too. It’s also another great way to get your brand in front of potential customers.
What are the benefits of financing for your business?
There are many benefits to funding a van which makes it such a popular option in this day and age. The main perk for businesses is the fact you get to drive a new model without paying a potentially hefty price tag upfront.
However, don’t be under any illusion that van finance is your only option when it comes to owning a new or used vehicle. As with any finance deal, there are pros and cons to making the commitment, which we’ve outlined below…
Advantages and Disadvantages
|Flexible repayment terms available||You don’t own the vehicle|
|Zero-deposit deals can be accessed||Interest rates can be high|
|A chance to be approved even with bad credit||No option to leave the contract early, unless at least 50% of the van’s value is paid|
|Not necessarily limited to annual mileage restrictions||Failure to keep up with repayments can result in repossession|
|Monthly costs can be effectively managed||Modifications to the vehicle may be restricted|
|Options to keep or return the van||Declined applications could harm your credit score|
|You get to drive the latest model of van||No upfront deposit will mean higher monthly payments overall|
|Chance to build positive equity towards another van||A one-off fee is needed to own the van|
|Hand the vehicle back without the hassle of selling it privately||Damage above standard wear and tear could incur further costs|
FAQs and Answers
By reading our business van finance blog, we hope you feel in a better position to make a decision about whether a business loan is the solution for you and your Company. If you still have a question you want answered regarding funds or types of financing, then please refer to our FAQs below on the topic or get in touch with us and we’ll be happy to help:
Can I get a business loan for a commercial vehicle?
Yes, it is possible to get a new or used van on finance through your business. If you’re a start-up business, van loans can even help your company grow.
Can I lease the van to my business?
Yes, you can lease a van to your business - this is known as ‘leasing assets’, of which a commercial vehicle falls into that bracket.
Is van leasing 100% tax deductible?
Yes, leasing vans is tax deductible and can be claimed as a capital allowance. This means you can deduct the value of the vans from your profits before paying tax.
Is buying a van a business expense?
Yes, buying a van can be classed as a business expense for companies. Depending on how you pay tax, it is possible to claim the cost of buying a van as an expense against the income tax due to be paid for your business.
What credit score do I need for eligibility?
There is no ‘magic score’ when it comes to what credit score is needed for van finance. The scoring system works slightly differently between credit reference agencies, but to give you a guide, your credit score should sit within the bracket of 670-739 which is generally classified as ‘good’.
Is van finance different from car finance?
Generally, there is no difference between van finance compared to car finance when it comes to the application process. The only difference is that financing a van tends to have more work vehicle-associated perks.
How hard is it to get van finance?
The difficulty of obtaining van finance is largely due to having a bad credit score because of poor credit history. However, there are lenders that specialise in offering finance solutions to customers with bad credit.
Commercial vehicle finance solutions at Loads of Vans
Here at Loads of Vans, we understand it's not always possible to pay for a new or used van upfront. This is why we offer a range of van financing deals and options to our customers and their businesses, including Hire Purchase, Contract Hire, and Finance Leasing.
We are not a business finance provider or a van finance company ourselves but work with a range of lenders across the UK to secure you the best possible deal and top services. As such, you could drive away in a van for as little as £99 a month!
Visit our dealership in North Cheam, Sutton, near London, to view the latest deals on a whole range of new and used vans in stock. Or start your search now and explore our vehicles online to find out how much you will pay per month and what funding options you have.
More guides at your fingertips
Understanding finance doesn’t have to be frustrating. At Loads of Vans, we make it our job to help clients during their van-buying journey. That’s why our website news section is full of advice, information, and helpful guides that explain things clearly.
We’ve covered topics such as how to get approved for van finance with a poor credit history, explain more about how van finance works if you’re self-employed, as well as talk you through how ‘no deposit’ finance deals work. Head over to the Finance blog section to learn more about van finance and its benefits.
Contact us today and one of our dedicated team members will be more than happy to give you all the information you need about the types of vehicle finance and business funding available. Expand your fleet with our business vans to make sure you get the best value for the money.