Introduction
Did you know that there are several ways you can find financing for your business vehicle?
Or that you don’t have to go to a bank, you could drive away from a dealership with a car today for a deposit and make easy monthly payments?
In this guide, you’ll find out everything you need to know about funding for your brand new car, including where to look and what’s on offer.
Let’s dive in and find out more.
What’s in this guide?
Top 5 business car loan providers
1. NatWest
Type: Bank
Loan amount: £7,500 to £19,950
Typical APR: 3.4% APR
Loan term: 2 to 8 years
NatWest offers personal loans for purchasing vehicles, which are the details used in this example. However, they also provide asset financing through Lombard.
They do not offer a specific APR or example as you can choose a specific plan that can either have a variable or fixed rate, depending on your particular business needs.
Representative: Borrowing £7,500 for five years with monthly repayments of £135 at 3.4% APR, means that you’ll end up paying back £8,155.80 in total.
Company rating on Trustpilot: 1/5
2. CreditPlus
Type: Alternative finance provider
Loan amount: £3,000 to £100,000
Typical APR: 7.8%
Loan term: 2 to 5 years
According to the CreditPlus website, they help around 80,000 customers a year to get the right financing to support their business grow and get the essential vehicles you might need.
With an excellent Trustpilot score of 5-stars and hundreds of positive reviews, CreditPlus might be the best option for your business.
Representative: If you borrow £7,500 with an excellent credit rating, for around 48 months with a representative APR of 7.8%, you’ll pay back £182.5 a month, and in the end, you’ll pay back a total of £8,760.
Company rating on Trustpilot: 5/5
3. Barclays
Type: Bank
Loan amount: From £10,000
Typical APR: No data
Loan term: 1 to 5 years
Barclays is a household name when it comes to banking, loans and mortgages, but could they also help you with asset financing?
Good news is, Barclays offers customers who have been with them for at least 12 months asset financing so that you can purchase things for your business such as equipment and vehicles.
Company rating on Trustpilot: 1/5
4. Mercedes-Benz
Type: Car manufacturer
Loan amount: £48,384.47
Typical APR: 5.4%
Loan term: Four years
Mercedes-Benz is one of the most well-known manufacturers of cars not only in the UK but also in the world.
They can offer their customers deals that mean that you make monthly repayments when buying a car, so instead of paying a huge lump sum, you can make secure smaller payments instead.
After you make all of these repayments and any final fees, you’ll then own the car you have bought, but you can drive it from the get-go.
Company rating on Trustpilot: 1/5
5. Volkswagen
Type: Car manufacturer
Loan amount: The cost of the car
Interest: 3.3%
Loan term: 12 to 60 months
Volkswagen is a German manufacturer that dates all the way back to the early 1900’s, and although it may have a chequered history regarding its affiliations, the British took over post-WW2 and now they are a globally recognised and trusted company.
Company rating on Trustpilot: 1/5
FAQ
What is a business loan?
In short, it’s when you ask a lender like a bank to loan you some money so you can pay for things like more workers or a new premises.
You might also have to pay interest ontop of your loan.
Business loans can come from many different places, so as a business owner you should always try and consider as many possible solutions to find the best deal.
What is a short-term business loan?
A short-term business loan refers to a loan that you need to repay in a very short amount of time, usually within two years.
This means that while you will end up paying less interest when compared to some long-length loans that you can borrow for around five years, the interest rate will likely be higher.
So don’t be put off by high-interest rates because it still might be cheaper than a more extended length loan.
Often, current loans will require a lot of information from you to trust that you will be able to make your repayments.
So, not only will you likely need to have a good credit score, but you may also need to produce full business plans or personal guarantees that you can pay the money back.
This can mean putting your assets up as collateral, like your home or a car for instance.
What is a business car loan?
Unlike business loans, a business car loan could come in various forms.
For instance, usually car manufacturers will let you drive home a car today for a deposit, and then pay off a big price tag in easy to manage monthly payments.
So in some ways, it is a loan, but at the end of those payments, you will own the car you bought.
Other providers such as NatWest will allow you to borrow the money for the vehicle, making it the most comparable with a traditional loan.
This can mean that you can afford a much more expensive car than you might have otherwise been to provide, and the amount that you can borrow is usually dependent on your credit score.
For more about bad credit and loans, check this out.
What are the types of loan available?
So, what exactly are the types of loans on offer? Take a look below and find out.
Hire purchase
One of the most popular methods of purchasing a car, mainly through a dealership, is to use a hire purchase agreement.
This is when you drive away with a car usually on the same day that you put down a deposit, and you agree to pay the rest of the money off in monthly agreements.
Usually, this will be a few years in length, and the APR depends on the dealer, but you could expect it to be around 3% – 4%.
Once you have paid off the remaining balance, you then officially own the car.
The negative side of this is that because you don’t own the car until it’s been paid off, your vehicle can be repossessed if you fail to make your monthly repayments.
In the circumstance that you have already paid off a third of the cost, the dealer will have to produce a court order to take back the car.
Asset financing
Asset financing is offered by most big banks such as Barclays, who can provide their existing customers with a trading history of at least two years to borrow £10,000 or more for up to five years.
This allows you to purchase things such as vehicles, equipment or anything tangible that your business requires to be able to thrive.
Similarly to most loans, it means that you will be able to spread your costs over a set amount of time, which can help your regular cash flow and ensure that you know what to budget.
Most banks will craft a bespoke arrangement that caters to your businesses needs and finances.
Leasing or contract arrangements
This type of financing is necessarily a long-term rental contract, so you won’t own the car during or after a set amount of time that is contracted.
However, you will have use of a car for monthly payments, where there is usually a strict mileage and details around what kind of condition you need to keep it in.
At the end of these contracts, you can either hand the car back to the dealer or perhaps enter into another deal.
It depends entirely on your personal preferences.
Personal loans
Another option is, of course, taking out a personal loan to purchase a vehicle for your business.
This is sometimes regarded as being a better option than purchase hiring agreements, as you can sell your car to pay off your loan if you fall behind on payments.
You do have to keep in mind that you can only usually borrow a smaller amount, which is typically under £10,000, so you will need to buy a car that is reasonably within your price range.
Plus, you need to be able to ensure that you can pay back what you owe without falling into dangerous debt.
What should you consider when applying for a car loan or lease?
Like with any loan, there are certain things that you should try and consider when concluding whether or not a loan or investment in an asset is right for you.
- The cost of the loan
- How much the monthly repayments are, and if they are manageable
- What kind of deposit you need
- The limits that your dealer has
Essentially, ensuring that you can make back your monthly repayments is the most critical factor to consider when looking at your loan options for purchasing a car.
Especially if, like with hire purchases, you don’t own the car till your very last payment, which means that your vehicle could be repossessed should you fall behind on repayments?
If you decide to opt for a leasing arrangement, you should also keep a close eye on the terms and conditions of your lease, and what kind of shape you need to keep your car in.
Conclusion
In conclusion, there are multiple options available to you when you are considering a loan to purchase a car; you could take out a personal loan, a hire agreement or even decide to rent a car for the short term.
Why not take a look at the ExpertSure guides? They will tell you everything you need to know about your finances, or you could fill out the form at the top of the page and discover what loans are available.
