Businesses often need vans, trucks or cars to operate, but purchasing them outright can be expensive. In the UK, many companies rely on commercial vehicle finance to spread the cost of buying vehicles. For example, data from the Finance & Leasing Association (FLA) shows that in 2024 UK businesses secured £39.7 billion of new finance for machinery, equipment and vehicles. Asset financing lets firms obtain assets (including commercial vehicles) without a large upfront outlay, by leasing or hiring them and paying monthly instalments instead.
How does financing a vehicle work?
Vehicle financing is essentially a loan or lease for the cost of the vehicle. The lender (or leasing company) pays the seller, and the business repays the amount with interest over time. With a standard business loan, you borrow a lump sum and pay it back in instalments with interest. For asset finance or hire-purchase, the process is similar: you typically pay an initial deposit and then fixed monthly payments.
Over the term, you gradually pay off the vehicle’s value. For example, under a hire-purchase plan you own the vehicle after the payments end, whereas with a lease you typically return the vehicle at the end. Each monthly payment covers part of the vehicle’s value plus interest.
Commercial vehicle finance options
Business owners can choose from several financing methods:
Hire purchase
Hire purchase is a popular option. You pay an upfront deposit (often around 10–20% of the vehicle price) and then fixed monthly instalments over an agreed term. Once all payments are made, you own the vehicle outright. This option suits businesses that want ownership at the end. The monthly payments include interest and are based on your credit profile, so good credit can secure a lower rate.
Finance lease
A finance lease lets you use the vehicle for fixed monthly payments. You may either cover the full cost in instalments or pay lower monthly amounts with a larger final balloon payment. At the end, you typically sell the vehicle (through the leasing company) or pay the balloon to keep it. Any profit from selling the vehicle can go to your business. Finance leases are more flexible than hire purchase, but you must manage any difference if the resale value is lower than expected.
Contract hire (leasing)
Contract hire (operating lease) is specifically for vehicles and fleets. Under a contract hire agreement, a leasing company provides and maintains the vehicles while you pay fixed rentals. The finance provider retains ownership and responsibility for disposal at the end. This is a low-risk option if you need multiple vehicles, since the leasing firm handles maintenance and you simply return the vehicles at term. Contract hire can also offer tax benefits – for example, if the vehicles are low-emission, companies can claim up to 100% of the VAT and offset the cost against corporation tax.
Business loans and outright purchase
You can also take a business loan or mortgage to buy the vehicle yourself. A secured business loan or an overdraft can fund a vehicle purchase, and you repay the loan with interest. Alternatively, if you have the cash, you can outright purchase the vehicle. Paying cash avoids interest charges but ties up capital. A business loan is similar to hire purchase: you get the vehicle immediately, make monthly repayments, and then own it. Many businesses use both methods, for instance leasing one van while financing another, to spread risk.
Overall, these options cover finance for commercial vehicles of various types. Asset finance (hire purchase or leasing) is often more accessible for vans and equipment, while direct loans might be used for very large purchases. Businesses may even mix methods – for example, leasing some vehicles and taking a loan on others – to balance cashflow and ownership needs.
Commercial fleet financing options
When funding an entire fleet of vehicles, businesses have additional considerations. According to recent industry research, over half (52%) of UK fleets operate second-hand vehicles. Smaller companies (under 100 staff) are the most likely to use used vans and cars (54% already do so). This suggests many businesses choose used vehicles to reduce costs and meet specific needs. Lenders typically structure fleet finance deals with this in mind – for example, by offering shorter terms or lower loan amounts to match the lower resale values of older vehicles.
For larger fleets, contract hire and fleet leasing remain popular because they simplify management and cash flow. Under contract hire, you pay fixed rentals and the leasing firm takes responsibility for sourcing and maintenance. This can ease fleet logistics, and all payments can often be treated as operating expenses. Tax rules may further influence fleet financing: for example, low-emission fleets often qualify for higher VAT reclaim and tax allowances.
Applying and qualifying for vehicle finance
To apply, businesses typically submit an application with financial details (accounts, bank statements, credit history) and information on the vehicle(s). Lenders will check your business and personal credit score, plus your financial stability. It helps to prepare by knowing your budget, required deposit and preferred term. Maintaining a good credit history can improve your terms and increase approval chances.
Using a broker or comparison service can simplify this. Rise Funding submits one application to multiple lenders on your behalf, often using only soft credit checks. This means your credit score won’t drop just from applying. Brokers match your situation to lenders (banks, finance companies, leasing houses) and find the best interest rates. Getting an initial quote triggers only a soft credit search, so your score remains intact.
It’s wise to compare offers – consider the APR, fees and early repayment terms. Also check if the lender offers any extras (maintenance packages for fleets, or green finance deals for electric vehicles).
Finding vehicle financing
Financing a van, car or fleet for business use involves choosing the right product and terms. By understanding options (hire purchase, leasing, loans) you can decide whether you prefer eventual ownership or simply renting vehicles. The market remains active – for example, new business in the commercial vehicle finance sector was up 10% in 2024 compared to 2023.
Industry data highlights useful trends, namely the shift to used vehicles in fleets and the large scale of asset financing, suggesting businesses are valuing flexibility and cost savings. Armed with this insight, make sure to shop around for the best commercial fleet financing options and vehicle funding deals. Rise Funding’s own Asset Finance and Business Loans pages provide further guidance and comparison tools.
Contact us through the form below, or get an instant quote by completing our online questionnaire.
