Business Finance for Trucks
If you’re looking to raise funds for a truck, you could take a secured or unsecured business loan. Get the best deal with ABC Finance.
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20+ years experience in business loans
Business finance for trucks
Business truck finance allows companies to purchase trucks, lorries, HGVs and trailers using a loan.
Vehicle purchases can be costly and involve a significant upfront payment, using business truck finance allows a loan to be paid back in manageable instalments helping maintain cash flow.
What is truck finance?
Truck finance is a loan that covers the lease or cost of a vehicle; it is a type of asset finance that is seen as lower risk by a lender as the loan is secured against the truck meaning if the loan defaults the lender will become the owner of the vehicle.
In this ABC Finance deep dive, we examine the pros and cons of the different types of truck financing available.
How does truck financing work?
Truck financing works by enabling businesses to borrow funds to purchase commercial vehicles, whether it is a single truck or a fleet of lorries. Often company vehicles are an essential, yet high-cost expense. Purchasing a truck outright could severely impact cash flow and truck loans can help mitigate this cost.
There are a range of specialised financial products that provide truck finance and lenders can provide a direct loan or a leasing agreement to cover the cost of the vehicle.
Monthly repayment amounts and interest rates will vary based on the type of financing arrangement, and the credit rating of the business. Some forms of finance may also require a fee or deposit when setting up an arrangement.
What are the different types of finance for business trucks?
There are a number of finance options available for purchasing business trucks and commercial vehicles, the main types are as follows:
Hire purchase (HP)
is a financing option where a business pays an initial deposit followed by monthly instalments. Owner equity will build over time and when all the instalments have been made the business then owns the vehicle over time.
This arrangement benefits businesses that want to purchase a vehicle but don’t have the ability to pay for it upfront, or wish to spread payments to manage cash flow. As a lender has a stake in the vehicle and it is used as equity interest rates can be more favourable using this secured finance option.
Operating leasing
This arrangement allows a business to use a truck for a fixed period; however, the business will not own the truck at the end of the lease term and it will be returned to the leasing company.
The benefit of this option is that it can be relatively low cost, there will be no depreciation costs in terms of owning vehicles and some leasing arrangements will include the costs of maintenance and servicing.
Finance leasing
A finance lease combines elements of a hire purchase and operating lease arrangement. A business will lease a truck, pay for maintenance and insurance yet have the option to purchase the vehicle at the end of the lease, usually for a low fee.
Unsecured loans
Unsecured loans are a type of credit that isn’t based on assets such as property or stock and so for truck finance the vehicle would not be used as collateral.
Lenders will assess the creditworthiness of a business and the likelihood that they will be able to pay back the loan. Unsecured loans are often shorter term arrangements.
This type of loan is considered to be higher risk as the lender does not have certainty the payments could be met, or that they will receive their money if the business defaults on the arrangement. Unsecured loans ordinarily have higher interest rates than secured loans.
An unsecured loan to purchase company vehicles would be most suitable for a business that has a good credit score.
What will I need to provide to get truck finance?
A range of documents will be required to qualify for truck finance. Requirements may differ between lenders, although in most instances you will need to show that the business is UK based and has been trading for at least six months.
Specific paperwork required will include:
- Proof of company incorporation.
- Bank statements.
- VAT returns.
- Inventories.
Business plans showing why vehicles are required for the business and how they will be used.
Why should I work with ABC Finance?
ABC Finance is a specialist broker that has been supporting businesses since 2000 and is regulated by the Financial Conduct Authority. Our experts work with a wide panel of lenders and take time to understand your business needs to get you the best deal; our aim is to save you money.
We’ve helped over 30,000 businesses find loans to suit their specific circumstances and understand specialist financial products such as truck finance – our Trustpilot scores and reviews demonstrate how happy our customers are with our service.
You will be supported by a dedicated specialist advisor guiding you through the loan process at every stage. We use our knowledge of the market to find the most competitive rates.
Is truck finance tax deductible?
Tax relief can be a complex area and so make sure to consult a financial specialist if you are looking to reduce your tax liabilities by using truck, or any other form of vehicle finance. If you are considering electric vehicles for your business then it is especially important to take advice as this area of taxation is constantly changing.
It is possible to obtain tax relief on some elements of truck finance; however this depends very much on the financial product you choose and whether your loan is secured or unsecured. For tax purposes, a loan will be split into two different parts, and only one will be eligible for tax relief, here we explain how tax is applied:
Principal payments
If you finance your truck through a loan you will repay the loan itself, known as a principal payment, and also interest on the loan. UK businesses cannot claim tax relief on a principal payment and this is because it is viewed as a ‘capital expenditure by HMRC.’ A capital expenditure is seen as something that improves the long term outlook of a business and gaining assets such as company vehicles count in this category.
Interest payments
Interst payments are tax deductible and so tax relief can be applied to this portion of a loan. It is important to demonstrate clearly what your interest costs are and this can be shown by the lender in a yearly statement.
Capital allowances
Capital allowances are a type of tax relief for businesses and in some circumstances HMRC may allow you to write off a portion of the truck’s cost against taxable profits each year. Over time your asset will depreciate in value and a capital allowance allows this to be recognised through the tax system on a yearly basis.
The amount you can claim against capital allowance will vary depending on the type of vehicle you have, the original cost, how much it is used and what type of fuel it uses.
Electric vehicles (EVs) and tax incentives
There are a number of tax incentives that apply to zero and low-emissions vehicles to encourage companies to choose more environmentally sustainable options.
For example, from April 2021 business owners can claim 100% of the cost of an electric vehicle (EV) against tax if it is new and has zero emissions. This incentive is called the First Year Allowance (FYA) and the benefit must be claimed in the same year the vehicle was registered.
In addition to a significant capital allowance saving for new EVs with zero-emissions, there are a number of schemes to encourage companies to choose electric vehicles over other types of combustion engine.
From April 2020 EVs have been exempt from vehicle excise duty, commonly known as road tax, however, this exemption comes to an end in March 2025. There will be a transitional period where EV drivers must pay £10 rising to £180 the following year in line with other vehicles.
Benefit In Kind tax (BIK)
The benefit in kind tax is sometimes referred to as ‘company car tax.’ If an employee has a car provided by the company and also uses this for personal travel, such as family days out or going to the shops, this is viewed as a benefit not related to employment.
For EV cars the BIK is calculated at a much reduced rate of 2% between 2023 and 2025 and it will increase to 5% by 2028. This means that for companies considering EVs their employees won’t be hit with a large BIK tax bill.
Frequently Asked Questions
The amount your business can borrow will depend on the type of company you have, whether the loan will be secured against the vehicles, or other assets and the term of the loan.
Typically truck loans range from £5000 up to £250,000 for a Limited Company although larger amounts can be arranged depending on circumstances.
Potentially, yes. Whilst good credit is always helpful in terms of approvals, a poor credit rating is not necessarily a barrier to obtaining truck finance. ABC Finance works with a wide range of specialist lenders and will advise what the most suitable options are for your business.
Contact our team at ABC Finance for a callback and discussion about your needs. We are regulated by the Financial Conduct Authority, and with twenty years of experience we use our experience and market knowledge to secure you the very best deal.
The application process is simple, and straightforward, and in most circumstances the ABC team can help you fill in a simple application form and get a quick decision on truck finance from our specialist panel within hours.
Funds can be transferred to your business within 24 hours of the application.
Request a callback from one of our dedicated advisors to get started.