If you need a vehicle for your business, you might be reluctant to deplete earmarked cash. Cash reserves should be able to meet your day-to-day business expenses. Although you have a considerable size of cash, you would still be reluctant to pay for the vehicle. A large chunk of money would go out, and you will be left with little money. Chances are you struggle to meet your business expenses. If you are looking to buy a truck for your business, commercial truck finance in the UK can come in handy.

There are various financing options available to finance a commercial truck. You should consider the one that fits in your budget. This blog discusses several financing options to fund commercial trucks. Each option has pros and cons. Make sure that you carefully understand the upsides and downsides to ensure that you do not choose an expensive financing option.

Funding methods for commercial vehicles

Here are the financing methods for commercial trucks:

Hire purchase

Hire purchase is a kind of asset financing. A commercial vehicle you have financed with a hire purchase will itself serve the purpose of collateral. A hire purchase is not like a personal loan, in which the title of your car is retained with you from the very first day.

You will receive ownership of the truck at the end of the last payment. As the title of the truck is retained by the truck financing company, they have the right to repossess it in case of a default.

Upsides and downsides of hire purchase

1. ·        It spreads the cost: you can prevent your cash flow from being disrupted by avoiding larger.
2. ·        There will be no restrictions related to mileage and usage. You are free to drive the way you want to.
3. ·        You can finance either a new truck or an old truck with a hire purchase.
4. ·        Ownership will be retained by the finance company. Unless you pay back the full amount, you will not be able to have ownership of the truck.
5. ·        You will have to pay down a larger deposit. It must be at least 10%, more if your credit rating is bad.
6. ·        Monthly payments would be larger, so sometimes, it becomes challenging to budget around payments.
7. ·        You will be responsible for all maintenance, repair, and insurance costs.

Finance lease

A finance lease offers more flexibility than a hire purchase or any other financing option. It gives you an option to purchase the vehicle at the end of the contract. Throughout the contract, you will be paying a small amount to the lessor.

This small monthly payment would cover the interest as well. At the end of the contract, you have the right to own it at a predetermined price or continue to lease it. A finance lease is generally a suitable option when you need to renew a commercial truck every now and then.

The pros and cons of finance lease

1. ·        The biggest benefit of a finance lease is that every month, you will pay down a small amount of money.
2. ·        You have the flexibility to purchase the vehicle at the end of the term.
3. ·        The maintenance and repair charges will be managed by the financing company.
4. ·        Every month you will pay a small amount of money. You will find it much easier than a hire purchase.
5. ·        It is certainly a cost-effective strategy for buying a new vehicle.
6. ·        You will have restrictions on mileage. Exceeding the recommended mileage will charge you additional money.
7. ·        You will not have a wide variety of vehicles to choose from.

Contract lease

A contract lease is more expensive than a finance lease, but it is an excellent option if you are looking for hassle-free vehicle finance options. A contract lease allows you to rent a commercial truck. While a finance lease spreads the cost of the truck, an operating lease involves a rental amount that you pay down every month.

One monthly payment covers rental figures as well as maintenance charges, so if anything goes wrong, you do not have to worry about additional expenses. It could be a better option if you want to buy trucks on finance in the UK.

Here are the advantages and drawbacks of a contract lease

1. One of the biggest benefits of an operating lease is that payments include maintenance and repair charges.
2. You will pay down a fixed monthly payment.
3. The contract can be renewed with a new truck as and when needed.
4. An operating lease will cost you more money than a finance lease.
5. There are certain restrictions related to mileage.
6. It does not offer any flexibility, such as owning a vehicle.
7. You will be penalised for excessive wear and tear.

Business loans

There are various financing options. You can choose any of them that suits your budget. If you do not want to use the aforementioned financing alternatives, you can take out a business. In order to finance a truck, you can also rely on a business loan.

Business loans can be secured or unsecured, depending on the amount you borrow. Unsecured business loans could also be used to finance a commercial truck. If you use a secured business loan, you do not need to put down additional security. Your truck will itself be served as collateral.

In both kinds of loans, a lender would allow you to use the truck the way you want. There will be no restrictions related to mileage. Bear in mind that your lender will have the upper hand, so you should always try to avoid default.

Here are the pros and cons of business loans:

1. ·        You can buy either a new or an old truck with business loans.
2. ·        They do not have to be unsecured, so there is no risk of losing your collateral.
3. ·        Payments are manageable because the debt is paid down over an extended period.
4. ·        Interest rates will be high. Business loans could prove to be more expensive.
5. ·        If you prefer a secured business loan, you should still have a good credit rating.
6. ·        Start-ups would likely face difficulty getting approval because of the absence of stable income.

The bottom line

If you are looking to finance your commercial truck, you might be confused about which funding option you should choose. There are various funding alternatives that you can choose. Each financing option has its own pros and cons. You should always ensure that you understand them well.

In addition, identify your needs. Whether you need a truck for a long period of time or you need to upgrade it in a short period. Look into your budget so you do not struggle to make payments. Choose a funding alternative that meets your needs.