Commercial asset finance: how to fund HGVs, plant and machinery

Commercial asset finance lets companies spread the cost of a big asset, such as an HGV, a vehicle fleet, plant or production machinery, over a fixed number of payments, secured against the asset. You can choose from hire purchase agreements, which suits assets that you intend to keep, or leasing options, which are for kit you'll replace.

Here's how the products compare, what lenders offer, how VAT and tax is dealt with, and where a loan is a better fit.

Members of the Finance & Leasing Association financed a third of UK investment in machinery, equipment and purchased software in 2025, according to the association.

This guide explains how commercial asset finance works so you can compare it fairly with other finance options, such as iwoca's flexible business loans. Lender terms and tax rules included were checked on 12 October 2026.

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What counts as commercial asset finance?

Commercial asset finance is borrowing tied to one specific business asset with a resale value, such as an HGV, a trailer fleet, an excavator or a production line. The asset is the lender's main security. It's one of several commercial finance solution, alongside things like business loans, invoice finance and commercial mortgages.

Because the lender can take the asset back, they care about what the asset will be worth as much as your accounts and creditworthiness. Common kit businesses use commercial asset finance for include:

• Heavy goods vehicles, trailers and vehicle fleets
• Excavators, telehandlers and other construction plant
• Production lines, CNC machines and packaging equipment

Kit that can't be resold, such as a fit-out, is harder to fund this way.

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Hire purchase, leasing or refinance: which option suits which assets?

If you want to own the asset and claim the tax allowances, hire purchase is usually a good fit. If you aim to hand it back or replace it every few years, a lease or contract hire usually suits better. If you already own the asset, refinancing can be used to release cash from it for other uses.

Here's a handy commercial asset finance comparison table:

The trade-off between hire purchase or a finance lease comes down to ownership and tax. Between a finance lease and an operating lease, it's about who carries the resale risk. Cars and vans have their own VAT rules, which are covered in our guide to financing vans, cars and fleets.

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What asset finance lenders offer: amounts, terms and deposits

Big lenders advertise terms from one to seven years and will fund up to the full price of some assets, so a deposit isn't always needed. However, many don't publishes interest rates, as you get a quote based on the specific asset, plus your accounts and credit history.

Here's a snapshot of terms and criteria advertised by three high-street lenders (accurate as of October 2026):

A bigger deposit usually lowers your payments and interest rate, and lenders may ask for one on older kit or for newer companies. Rates follow the market and are influenced by the Bank of England (BoE) base rate (or 'Bank Rate'), which as held at 3.75% on 17 September 2026, with lender mark-up on top. A fixed rate option protects you from potential rising rates.

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What a commercial asset finance deal costs: a worked example

On a £150,000 machine bought on hire purchase with a £15,000 deposit and an illustrative 8% rate over five years, you'd pay about £2,737 a month and about £29,239 in interest. You'd also pay VAT of £30,000 at the start, which a VAT-registered company can usually reclaim.

Your actual rate will depends on the asset, your company and the lender, and fees add to the total. A balloon payment lowers the monthly cost but adds interest. For a rough monthly figure, try our business loan calculator.

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VAT and tax on a large asset

On hire purchase, VAT on the whole price is due at the start, and the interest is VAT-exempt. On a lease, VAT is added to each rental. You can claim capital allowances on hire purchase, but not on an ordinary lease, and cars are treated differently.

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VAT

HMRC treats hire purchase as a supply of goods, so VAT is charged on the full price when the agreement starts (VAT Notice 700). On a £150,000 asset, that's £30,000 to find on day one, reclaimed on your next VAT return if the asset is used for taxable business. Some funders offer to defer that VAT for a few months, so ask. On a lease, VAT on each rental spreads the cost.

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Capital allowances

You can claim capital allowances on items you buy on hire purchase, but not on things you lease (gov.uk). For a limited company buying plant or machinery on hire purchase:

• The Annual Investment Allowance lets you deduct up to £1m a year of qualifying spend from profits, new or used.
• Full expensing gives companies a 100% deduction on new and unused plant and machinery, with no upper limit.

On a lease, the rentals are usually a running cost instead.

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Cars are the exception

Cars don't qualify for either allowance. You usually can't reclaim VAT on buying one, and you can only reclaim 50% of the VAT on car lease rentals if there's any private use (VAT Notice 700/64). Vans and lorries used for the business don't have that restriction.

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What lenders look at before they say yes

Asset finance lenders want to see that your company can afford the payments, then look at the asset itself: what it's worth, how old it is and who's selling it. They may also ask a director for a personal guarantee, even though the asset is a security.

Expect a lender to look at:

• Your bank statements and filed accounts, to check the payments are affordable alongside your other borrowing.
• The credit files of the company and its directors.
• How long you've been trading. For example, Barclays asks for over two years, and Lloyds for at least 13 months.
• The asset: its price, age, expected life, resale value and whether it comes from a dealer or a private seller.

A guarantee means a director could be asked to repay personally if the company can't. Our guide to a director's personal guarantee explains what to check.

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Can you finance used kit and refinance assets you already own?

Yes, many lenders finance used vehicles and plant, but they may cap the asset's age and want a valuation, especially for a private sale. If you already own the kit, a refinance or sale and leaseback can release cash from it.

With used kit, expect a lender to:

• Set a maximum age for the asset at the end of the agreement.
• Ask for an inspection or independent valuation, especially at auction or from a private seller.
• Price the deal differently, or ask for a bigger deposit, if the asset is older.

Refinance works the other way round. Some provider will lend against assets you've recently bought with cash. Lloyds offers Sale and Hire Purchase Back of up to 90% of a recent purchase. It frees up cash, but you'll pay interest on money you'd already spent.

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Go direct or use a broker?

Going direct can suit a simple deal with your own bank, while a broker can be a good option for an older asset, a large or unusual deal, or a company the high-street banks turn down, as long as you ask how they're paid.

Ask any broker the following questions:

• How are you paid, and is there a fee or commission?
• How many lenders do you work with?
• What happens if I want to settle the agreement early?

To weigh up benefits and terms offer by different lenders, take a look at our equipment finance provider comparison piece.

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Asset finance vs a flexible business loan

For one large asset you'll keep for years, asset finance is often the cheaper and more natural fit, because it's secured on the asset itself. iwoca doesn't offer asset finance, but our Flexi-Loan helps you cover the deposit, the VAT bill before you reclaim it, used kit an asset finance lender won't fund, or the spend that comes with a new asset.

Weighing up asset finance against an unsecured loan comes down to the asset. A loan earns its place when the money isn't tied to one asset, or the asset doesn't suit an asset finance lender.

An iwoca Flexi-Loan can help with:

• The deposit on an asset-finance deal.
• The VAT due at the start of a hire purchase agreement, until you reclaim it.
• Used kit from a private seller or auction that an asset-finance lender won't take.
• The costs that come with a new asset, such as delivery, installation, training or the first insurance premium.

Here's how a Flexi-Loan works:

• Borrow up to £1m, over terms up to five years
• Repay early at no extra cost
• Get a decision within 24 hours
• A personal guarantee is needed from at least one director
• Available to UK limited companies

Ray Iqbal, founder of The Building Co., used a Flexi-Loan to buy specialist plant for a December project rather than ask his client to pay for it:

"I never ask the client to pay for equipment upfront. It doesn't come across as professional. It looks like you don't have confidence, and the client might wonder if you've done this kind of work before."

A Flexi-Loan is not right for every business. If you want to spread a six-figure asset over, say, seven years at the lowest cost, asset finance may be the most suitable solution for you.

Since 2012, iwoca has provided £5bn+ of funding to 100,000+ UK businesses.

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Commercial asset finance: common questions

What is a balloon payment?

A balloon is a larger final payment that lowers your monthly payments, because part of the cost is pushed to the end of the deal. You'll pay more interest overall, so check you'll have the cash, or a plan, when it falls due.

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Can a new company get commercial asset finance?

Sometimes, but it's often harder. Lenders publish trading-history minimums, and a new company may be asked for a bigger deposit or extra security. A specialist lender or broker may be the better route.

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Can you use asset finance to buy commercial property?

No. Asset finance covers movable assets such as vehicles and machinery. Property is usually bought with a commercial mortgage.