Having access to the right transport for your business is vital. Whether that’s vehicles to complete deliveries or cars that not only get your employees where they need to go but also make the right impression, your fleet has to be up to the task. In this article we answer the question ‘Can I finance a car on business finance?’
Vehicles can be one of the most significant investments that any business can make. Finding affordable and realistic ways to finance that investment is crucial. Luckily, business car finance can make it easier to secure the vehicles you need to run your business.
What is business car finance?
Business car finance is a form of financial arrangement that makes it possible for businesses to acquire vehicles for commercial use. Whereas personal car finance is designed for individual consumers, business car finance is structured to meet the needs of businesses and self-employed individuals. It allows companies to obtain the vehicles they need to conduct their business without the need for prohibitive upfront payments.
Business car finance has a number of advantages for business owners:
Lower upfront payments
By financing your vehicles through business car finance you remove the need for large upfront payments. This not only makes vehicles more accessible, it also helps to preserve your capital for other aspects of your business such as expansion, operational expenses or investments.
Fixed Budgeting
Fixed monthly payments make it easier to manage your cash flow and budget effectively, removing the possibility of nasty surprises.
Tax Benefits
Some forms of business car finance may offer tax advantages that could reduce your overall tax liability.
Access New Vehicles
Accessible business car finance makes it easier for you to obtain the latest vehicle models, improve your business image and work more efficiently.
How to get car finance through my business
If you’re looking to finance your next vehicle through business car finance it’s important to clearly understand your needs and the process involved. To make sure the process is as smooth and hitch-free as possible it can be helpful to follow the following steps:
Assess Your Needs
You should begin by determining the specific requirements of your business for vehicles, what you currently have available and what you need. You should consider the number and types of vehicles required and your budgetary constraints.
Research Lenders
Various financial institutions and lenders specialise in business car finance. Different lenders will be more suitable for different business car finance needs so it’s important to explore the market. At Business Finance House, we work with 80 lenders and can find the most appropriate loan for your particular circumstances.
Choose the Right Type of Finance
There are many types of business car finance available. Some forms of business car finance will be more suitable for different businesses, their finances and particular needs so you need to do your research. It’s important to select the form of business car finance that aligns best with your business goals and financial capabilities.
Prepare Documentation
Before you begin the application process it can be helpful to gather and prepare any financial documentation you may require. This can include financial statements, tax records, and credit information. This documentation will be used to assess your creditworthiness and to determine the terms you may be offered.
Make Your Application
You are now in a position to make an application for business car finance. You should be prepared to provide information about your business and its current financial standing. Once your application is approved, you should receive the terms of the finance agreement. This will include the interest rates, the repayment schedule, and any other conditions.
Working with a specialist business finance company like Business Finance House can simplify the process of finding the right lender for your specific needs and increase your chances of success. If you’re happy with the terms you can then sign the finance agreement and choose your vehicle.
What types of business car finance can I get?
There are a number of ways in which businesses can finance vehicle purchases:
Hire Purchase
Hire Purchase (HP) spreads the cost of a vehicle over a fixed period of time. An upfront deposit is made followed by regular monthly instalments until the full cost is covered. Once all payments have been made as per the agreement, the business gains full ownership of the vehicle.
Finance Lease
A finance lease agreement allows businesses to effectively rent a vehicle for an agreed-upon period of time. At the end of the lease term, you can choose to return the vehicle, extend the lease, or purchase the vehicle. The purchase price of the vehicle will usually be determined at the beginning of the lease agreement.
Operating Lease
An operating lease is similar to a finance lease and allows your business to use the vehicle for a specified period of time. This will typically be a shorter period than a finance lease, and it can include services such as maintenance and insurance. At the end of the lease period, the vehicle is returned.
Contract Purchase
A contract purchase combines elements of both HP and Leasing. A business will make monthly payments for an agreed period. At the end of that period, they then have the option to purchase the vehicle at a predetermined price or to return it. This is often used by businesses who look to regularly update their vehicles.
Business Loan
Perhaps the simplest means of financing a vehicle for your business is via a business loan. A business obtains a business loan to cover the cost of the vehicle. The loan is then used to purchase the vehicle outright. A business loan may be unsecured or secured on business or personal assets. These can be a great choice for a business on a sound financial footing looking to purchase a vehicle outright from the beginning.
As you can see, there are a range of methods available to help businesses finance their vehicle purchases. Each method has its own distinct features and benefits. Some options immediately transfer ownership of the vehicle to your business, others are more like rental agreements that give you the option to purchase the vehicle outright at the end of the leasing term.
Both have their advantages and disadvantages, with the most suitable choice for your business depending on your specific needs and preferences. Your choice of business car finance should be affordable, realistic and likely to support the growth and future success of your business.
What is the best type of business car finance for me?
Your choice of business car finance will depend on a range of factors. Firstly, the exact needs of your business, its financial situation and your long-term business goals.
Here are some of the factors you may wish to consider…
Ownership
If you want to own the vehicles from the beginning or at the end of your finance term, a business loan, HP or contract purchase will be more suitable than a leasing agreement. If you want to return or update your vehicle at the end of the term then a finance lease or contract hire can be a better fit.
Budget
Every business has budget constraints. Some business car finance options can require lower upfront costs but have higher monthly payments. Others may involve larger initial deposits but will have lower monthly commitments.
Tax Implication
Different types of business car finance can have varying implications when it comes to tax. If you’re unsure about the tax implications of a particular form of business car finance it’s important to consult your accountant or tax advisor before proceeding with an application. They should be able to advise which option will offer the most favourable tax treatment for your business.
Mileage and Usage
You should carefully assess how the vehicles will be used to determine how many miles you’re likely to cover in a year. Some agreements will contain mileage limits and it’s important to ensure that these are generous enough for your needs. If a leasing agreement cannot meet your mileage requirements you may need to explore other business car finance options.
Maintenance & Servicing
Some contract agreements will include maintenance and regular servicing. These will usually come with an added premium so may not be the most cost-effective but can be helpful for many businesses. Operating leases and contract hire agreements are most likely to include these services.
Selecting the right business car finance should be based on a comprehensive understanding of your specific business requirements and long-term objectives. By carefully assessing these facts you can make an informed choice that better aligns with your financial capabilities and meets your business needs.
Striking a balance between your immediate requirements and longer-term goals will make it easier to secure the right type of finance for your business.
Business car finance with Business Finance House
At Business Finance House, we offer a range of business car finance options for our clients. We provide businesses and individuals with tailored financing options designed to assist the purchase of vehicles. From passenger cars to large commercial vehicles, we have competitive options available. There are also options to use balloon payments to keep monthly repayments as low as possible.
Funding options include PCP, Hire Purchase and Lease Purchase. We can also help you purchase a vehicle or other vital business equipment through a short-term business loan.
We work with over 80 lenders to find the most appropriate loan for your particular circumstances.
Why not contact us today to find out more and to discuss your options?
