Commercial Vehicles – Asset Finance Solutions by Industry

This article examines the complexities of commercial vehicle finance, comparing asset finance solutions tailored to various industries. By understanding the advantages of asset finance, businesses can optimise fleet investments, improve cashflow, and enhance overall operational performance.

The acquisition of commercial vehicles represents a significant capital expenditure for businesses across diverse sectors. From logistics and construction to agriculture and waste management, the appropriate vehicle is essential for operational efficiency. However, the cost of purchasing a fleet can be prohibitive despite Commercial vehicles (CVs) serving as critical assets for many businesses, underpinning productivity and profitability.

Asset Finance for Commercial Vehicles

For business operating commercial fleets, asset finance is a great way to fund the purchase of vehicles and equipment without paying the full cost upfront. Asset finance is a broad term covering various financial options for acquiring assets. To understand these options better, please read our full guide 6 Types of Asset Finance – Finding the Right Solution.

According to the latest figures from the Finance & Leasing Association (FLA), asset finance for vehicles experienced significant growth in the twelve months leading up to February 2024.
– Finance & Leasing Association (FLA). (2024). Asset Finance Statistics. Retrieved from https://www.fla.org.uk/research/asset-finance/

7 Benefits of Buying New Commercial Vehicles With Asset Finance

1) Preserve cashflow ▶ ▶ ▶
Commercial vehicles can be expensive. From a used van at £20k right up to a new concrete pump truck at £400k, buying vehicles is going to be a hit to your cash reserves. Even if you have enough working capital in the bank, businesses could feel that using it all to fund a vehicle leaves them open to unexpected costs, project or payment delays.

2) Get up-to-date technology and the latest models ▶ ▶ ▶
Like anything, the latest model tends to be more efficient and more productive than older versions. Stay ahead of the competition by acquiring the latest technology to enhance business efficiency, quality, and output.

3) Facilitate fleet renewal ▶ ▶ ▶
No fleet lasts forever, spread the cost of replacing vehicles when they need it rather than drag out the lifespan and risk expensive maintenance or operational downtime.

4) Boost business growth ▶ ▶ ▶
Ambitious business owners naturally want to grow, to win and take on new contracts. Not only does having a well-maintained newer fleet reflect positively on your business and make your employees proud to work for you, added capacity is obviously needed to expand.

5) Improved operational efficiency ▶ ▶ ▶
Modern, well-maintained vehicles reduce downtime, improve fuel economy, enhance safety and should cost far less in maintenance.

6) Potential tax advantages ▶ ▶ ▶
There may be tax benefits and allowances available when taking out vehicle finance. Payments may be tax deductible, for example, or capital allowances/grants might be available in some situations.

7) Improved brand image ▶ ▶ ▶
A modern, well-maintained fleet can enhance a business’s reputation and attract more customers, especially in industries where vehicle appearance and reliability are important factors.

Ultimately, asset finance is not just about acquiring vehicles; it’s about investing in the future of your business. By carefully selecting the right financing option, commercial vehicle operators can optimise their fleet, enhance operational efficiency, and drive long-term profitability.

Borrow Against Existing Vehicle Assets

Asset finance also offers additional flexibility by allowing you to leverage existing vehicles or assets as collateral for loans. This can be a lifeline during periods of cash flow strain, as it provides access to capital without selling off valuable assets. By using the value of their fleet as security, you can secure loans at better rates to fund growth, operations, or other strategic initiatives.

Asset Finance Options for Commercial Vehicles

Hire Purchase (HP) for Commercial Vehicles

Hire Purchase (HP) involves paying the VAT and a deposit upfront then making regular payments over a fixed term, with the goal of owning the asset at the end of the agreement, either automatically or after making a ‘balloon’ payment.

Example of HP

A Midlands-based, regional delivery service is experiencing rapid growth. To meet the increased volume, the company needs to expand its fleet of delivery vans. However, the upfront cost of purchasing new vehicles is a significant financial burden and cash flow risk.

By using Hire Purchase (HP), the company can acquire a fleet of modern, fuel-efficient vans without a substantial upfront investment. Additionally, the tax benefits of capital allowances associated with HP can help offset the cost of the vehicles, reducing the company’s overall tax liability. At the end of the HP agreement, the company will own the vans, providing potential resale value or the option to continue using them.

3 Key Benefits of Hire Purchase

⏵ Ownership – HP agreements mean you are guaranteed to own the asset if you keep up payments until end of the term.

⏵Agreement structure – If you pay the VAT and deposit upfront, and include a balloon payment at the end of the agreement, the monthly repayment can be much more affordable than spreading the cost of the whole asset across the term.

⏵Tax benefits – If you are going to own the asset, in many cases you are eligible to claim capital allowances. Full Capital Expensing for example allows you to write off the whole cost of the asset in the first year, meaning you pay less Corporation Tax, which can significantly offset the cost of finance. Always talk to your accountant.

Get started with Portman, we provide Hire Purchase options suitable for all types of business sectors. Fill in our quick online enquiry form and we’ll give you a quick call to discuss your needs and options. 

Finance Lease for Commercial Vehicles

Finance Lease is another popular method to acquire plant and heavy machinery. It’s similar to Hire Purchase but with a key difference: the asset is treated as owned by the lessee for tax purposes.

Finance leasing does not require the VAT to be paid upfront nor typically as big a deposit as a HP agreement. Operating Lease payments are effectively rentals, meaning they act as an operating cost which are deducted from your profit and result in paying less corporation tax.

Finance Lease Example

A facilities management company wants to expand its fleet of vans to support a new local council contract. The company’s working capital needs to be preserved for hiring staff, buying inventory and operational costs, as well as accommodating new payment terms for their public sector contract. A finance lease suits this business as they prefer not to pay the VAT for 5 vans upfront and make repayments whilst they service their new contract. They also then have flexible ownership options at the end of the term in case the contract is not renewed.

4 Benefits of using a Finance Lease for Vans, Trucks and Lorries

⏵ Lower upfront costs – With a lease you wouldn’t typically pay the VAT upfront, rather spread it across the term, reducing the initial outlay.

⏵ Flexibility – At the end of the term, you can give the asset back, continue leasing or explore ownership options.

⏵ Reduced risk of outdated vehicles – Leases can provide the flexibility to upgrade a vehicle after a period of time, allowing you to benefit from the latest technology or efficiency.

⏵ Tax benefits – Lease payments can often be deducted from your operating profits meaning you pay less corporation tax at the end of the year.

Portman can provide your commercial vehicle business with lease financing options for both the equipment and vehicles you need to keep business running smoothly.

Contract Hire / Operating Lease (OL) for CVs

Operating lease offers flexibility for businesses that need to regularly update their equipment. It can include maintenance and repair costs in the rental payments.

Contract hire is essentially another term for an operating lease, specifically within the context of vehicles. However, its application can be extended to other assets like plant and machinery. This option generally involves giving the item back at the end of the term.

Example of Contract Hire

A south-west based logistics business is experiencing increased demand due to a nearby industrial park expansion. This growth presents both opportunities and challenges, as the company needs to ensure it has the capacity to meet the rising demand while maintaining profitability.

Contract Hire allows the company to acquire new trucks without significant upfront costs. This frees up capital for other essential business activities, such as expanding their driver workforce or investing in new warehousing. The comprehensive maintenance packages included in the contract help to reduce downtime and ensure that the trucks are always in optimal condition. This is particularly important where reliability is crucial for meeting customer deadlines and maintaining reputation. Predictable monthly payments simplify budgeting and cash flow management, allowing the company to focus on growing its business and expanding into new markets.

At the end of the contract, the company has the flexibility to return the trucks or renew the lease for another term, depending on their future needs. By choosing Contract Hire, the trucking company can effectively manage its fleet, reduce costs, and enhance its capacity in a rapidly growing market.

9 Benefits of Contract Hire & Operating Leases

⏵ Minimal upfront costs – Typically require very little upfront payment.

⏵ Flexibility – Terms can be tailored to specific business needs, including vehicle type, mileage, and term.

⏵ Simplified Procurement Process – Can often provide a simpler and more streamlined procurement process compared to outright purchase, saving time and effort.

⏵ Reduced Administration – Lease providers often handle vehicle maintenance and administration, freeing up your business resources to focus on core operations.

⏵ Up-to-Date Fleet – A modern fleet can improve efficiency, reduce operating costs, and enhance customer satisfaction.

⏵ End-of-Term Flexibility – Choose to return the vehicle or renew the lease agreement based on your future business needs.

⏵ Reduced Environmental Impact – Many lease agreements include vehicles with improved fuel efficiency and reduced emissions, helping businesses contribute to a more sustainable future.

⏵ Increased Scalability – Leases offer flexibility to easily adjust your fleet size to meet changing business demands, ensuring you have the right vehicles at the right time.

⏵ Improved Asset Management – Leases can help businesses manage their assets more effectively, ensuring that vehicles are replaced at optimal times and reducing the risk of costly breakdowns.

Is Contract Hire or an Operating Lease the right fit for me?

Contract hire/operating leases offer minimal upfront costs, flexibility, managed maintenance, and predictable payments, making it an attractive choice for businesses seeking to acquire and operate modern vehicles without significant ownership commitments.

If you run a business and are looking to purchase business vehicles, don’t get caught out by dealer finance. See how Portman can help find your ideal finance solution.

Refinancing Your Existing Vehicles

Refinance is the process of restructuring an existing loan or lease agreement, typically to obtain more favourable terms or reduce monthly payments. Or, releasing equity from vehicles you already own by taking out a loan secured on a vehicle. Refinancing can be a valuable tool for businesses looking to optimise their financing arrangements.

Example of refinance for waste management vehicles

A Yorkshire-based skip hire and recycling business is facing increased competition and rising operating costs, including fuel prices and driver shortages. The company’s existing fleet financing arrangements are becoming a financial burden, with high interest rates. Plus, the business would like to broaden its services and requires more industrial warehousing.

By refinancing its existing skip lorries the company can take a secured loan that can both consolidate existing finance agreements and extend repayment periods, as well as provide additional working capital for the warehouse investment.

5 Benefits of refinancing a commercial vehicle

⏵ Reduced costs – Lower interest rates and reduced monthly payments can significantly reduce the overall cost of owning or leasing commercial vehicles.

⏵ Increased working capital – Reduced monthly payments can free up cashflow, allowing businesses to invest in new vehicles, equipment, or other growth initiatives.

⏵ Flexibility – Refinancing offers businesses the flexibility to adjust their financing arrangements to meet changing needs which includes extending the term.

⏵ Mitigated risk of financial distress – By managing debt more effectively through refinancing, businesses can reduce the risk of financial distress and improve their overall financial stability.

⏵ Consolidation – Refinancing can consolidate multiple loans or leases into a single, more manageable payment, streamlining debt management processes.

We can help you release working capital from assets that you already own. If you recently bought a high-value item outright but would now prefer to have financed it, we can help through a sale-and-lease-back, or sale-and-HP-back facility. Enquire with Portman to see how we can support your business with refinance.

Asset Finance For Vehicles: An Overview

At a glance, asset-based funding for the Commercial Vehicle Industry

Asset Finance Options	How it works	Why use it	Suitable for
Hire Purchase [Hire Purchase Options]	VAT and deposit paid upfront. Ownership passes to the business at the end of the agreement.	Own the asset outright but spread the cost over time.	Businesses that want to own the vehicle and can afford the initial and final payments
Finance Lease [Finance Lease Options]	VAT spread over the term. At the end of term, continue leasing, give back or explore ownership options.	Avoid initial VAT payment and a final balloon, and spread the cost over time.	Businesses that want to use the vehicle but don’t necessarily want to own it.
Operating Lease	Business rents the asset for a fixed period.	Access the latest model without long-term commitment.	Businesses with high vehicle turnover or those who prefer to focus on core operations.
Contract Hire	Similar to operating lease but typically for vehicles. Includes maintenance and servicing.	Manage vehicle costs effectively and focus on core business operations.	Businesses with predictable vehicle needs and a preference of all-inclusive packages.
Refinance [Asset Refinance Options]	Replacing existing finance with new finance, often to consolidate, release cash or acquire new assets.	Unlock capital tied up in existing assets or upgrade equipment.	Businesses with existing vehicle finance arrangements, looking to improve or get additional funds

Each option has its own advantages and disadvantages, so it’s important to consider your business’s specific needs and financial situation. A financial advisor can help you evaluate your options and choose the best fit for your commercial vehicle financing and always talk to your accountant if you are considering tax implications.

▶ ▶ ▶ Learn more about funding Commercial Vehicles with Portman, or start a new enquiry with us.

Alternative Finance for Commercial Vehicles

▶ Business loans – These can be used to purchase commercial vehicles outright or to refinance existing debt. (Learn more about business loan funding, below)

▶ Credit cards – While not typically recommended for large purchases, credit cards can offer short-term financing options. (Read our helpful article for A Guide to Choosing the Right Business Credit Card)

▶ Equity financing – Raising capital by selling shares in your business can provide funds for vehicle purchases.

▶ Grants and subsidies – The UK Government offers a plug-in grant to encourage the purchase of low emission vehicles, including vans and trucks. This grant is automatically applied by the seller and can be up to £25,000 for N3 type large trucks.

Business Loans for Commercial Vehicles

Business Term Loans

Business term loans allow multiple items to be bought with one lump sum, meaning you can invest across your business, whereas asset finance is usually linked to the purchase of a specific asset.

▶ ▶ ▶ Browse Business Term Loan Options

Short-Term Loans

Short-term business loans can offer flexibility and speed. Typically from 3-12m, these loans are designed to bridge a gap for those who have the capacity to repay quickly.

▶ ▶ ▶ Browse Business Short-Term Options

Business Flexi Loans

Flexible business loans are often quick to obtain, may offer flexible repayment schedules or allow the loan to be repaid with no early repayment fee and may not require collateral. However, they may have higher interest rates. Carefully evaluate your business’s needs before making a decision.

▶ ▶ ▶ Browse Flexible Business Loan Options

Contact us today to discuss your financing options.

Commercial Vehicle Case Studies

Discover how we’ve helped businesses in the Commercial Vehicle industry and read our Case Studies

Fleet Expansion Finance

Plant & Vehicle Finance

Construction Finance

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