Purchasing a truck is a major expense, even more so if you’re investing in a fleet. That’s where truck finance can make a huge difference, providing you with the capital and repayment options to get the vehicles you need for business and spread the cost over the long term.

Finance for business truck purchases and hiring needs comes in many shapes and sizes. In this article, we outline what you need to know and how to make the right choice for your business. 

What is truck finance?

Truck finance can be a loan or lease to acquire business trucks, lorries or HGVs, in the form of either asset finance or a short-term business loan. It’s a valuable tool for businesses to purchase the vehicles they need without having to shell out all the money upfront, instead paying regular instalments.

Businesses of all kinds can use truck finance with the lending agreement secured against company assets or the vehicle itself, lowering lenders’ risk.

Why use truck finance for your business?

Truck finance can make the difference between getting your vehicle now and waiting months to save up the necessary capital. Here are the main reasons to consider using business truck finance solutions: 

• Make your truck more affordable: You can finance the upfront purchase and pay back the value over up to 24 months.
• Get exactly what you need: Borrow the amount you need to invest in the type or number of vehicles you need without being constrained by liquidity. 
• Reduce cash flow pressure: Purchasing high-value assets like trucks can leave you with gaps in cash flow, restricting investment in operational needs or causing issues for upcoming tax bills and liabilities. 
• Enjoy repayment and agreement flexibility: Truck finance agreements offer different levels of flexibility. You may have options to trade vehicles in, make balloon payments to purchase outright or repay loans early. 

How to finance a truck or a lorry

There are various ways to finance a truck, lorry or HGV for business, including different hiring and leasing methods. In most cases, truck finance involves putting down a deposit and repaying the rest of the vehicle's value, or cost for its use,  over a course of periodic instalments. 

Here are some practical steps to take before comparing providers and entering a truck finance agreement in the UK:

1. Factor in maintenance, insurance and fuel costs – some agreements, like contract hires and operating leases, maintenance and servicing are included, which are not in others, while you’ll need to source your insurance.
2. Explore finance that suits your budget, cash flow and other operational realities – you want to ensure you have a manageable repayment schedule to avoid pressure on working capital or risks of missing payments.
3. Get expert financial advice – specialist guidance can help you leverage tax relief/capital allowances and the cost-effectiveness of different deals.
4. Select an agreement that best suits your requirements – truck finance isn’t a one-size-fits-all solution, so scope out your needs and budget and align providers and finance solutions with them.
5. Prepare clear financials and planning documentation – lending/leasing providers will want to see accurate business and finance details, including statements, credit history and your purpose for vehicle finance.
   

What credit checks are conducted for truck finance?

Most vehicle finance providers and their offerings require full credit checks to assess viability and risk levels, and the valuation of assets used as security. While this leaves a footprint on your credit file, which can cause a temporary dip in your business credit score, responsible and prompt repayments will see you maintain and increase your credit rating in the long run. 

If using a business loan to finance your truck from certain digital lenders, like iwoca, you may only incur a soft search, which won't impact your credit.

What are my truck finance options?

There is a wide range of HGV, lorry and pick-up truck finance options available, depending on whether you want to purchase and keep the vehicle, if your needs are temporary or long-term and the level of flexibility you require. 

Below are the main truck finance options for your business to consider:

Hire purchase or lease purchase

Through a hire purchase, your business can lease a truck for a fixed amount over a pre-agreed duration. You’ll have the option to purchase the truck or lorry at the end of the contract. Your business gets full use of the vehicle throughout the term, but won’t technically own the vehicle until a final payment is made.

Lease purchases are similar, but tend to have a larger ‘balloon payment’ towards the end of the term. While this can reduce your monthly repayments initially, it does mean you’ll have to plan for a larger final payment.

Contract purchase

Contract purchases may help to manage depreciation losses. Your repayments will cover the estimated residual value of the vehicle. This means you’re repaying towards a lower estimated future value of the truck, not its originally higher, initial value. You can buy or return the vehicle at the end of the contract.

Finance lease

Unlike a contract purchase, a finance lease does not allow future ownership. Monthly repayments usually cover a truck’s sticker price, plus interest. Once the contract ends, you can sell the truck on behalf of the leasing company (keeping much of its reduced value) or you can extend the lease at a lower repayment rate.

Operating lease

In an operating lease, the leasing company allows your business to hire a truck for a shorter period than its roadworthy life. They retain ownership and handle depreciation and can re-lease or sell the truck at its residual value when your contract ends. In short, your business exchanges future ownership for bearing less risk around a poor residual value.  

Contract hire

A contract hire agreement is much like an operating lease. This kind of leasing arrangement often includes optional extras, such as maintenance costs and specialised roadside assistance fees, and the leasing company carries the value depreciation burden.

Disclaimer: Seek out expert advice around VAT. Each of the above truck finance options will come with different VAT considerations, which could make what seems like a suitable option unsuitable and vice versa. Ask your accountant to guide you.

Buying a new truck or a second-hand truck

Costs can vary widely based on the vehicle’s specifications, according to Motor Transport magazine. Here are some estimates below: 

• Rigid trucks can cost from £45k to as much as £111k, depending on the tonnage and specifications. 
• Articulated trucks can range from around £70k to £85k, and that’s without factoring in costs for additional trailers. 

It’s much harder to provide an average price for second-hand trucks, because used vehicles differ widely in age, tonnage, mileage and technical specifications. Used truck financing may appear more affordable when you first compare it with new truck finance rates. But don’t forget that a new lorry is far more likely to have more manageable costs around ongoing maintenance and servicing, which only some leasing agreements will include in your repayments.

How long can you finance a commercial truck for?

There’s no standard or ideal length, as it depends on the lender, the finance method and the needs and model you choose. You can hire or lease trucks for just a couple of years, or get agreements that run between 3-8 years, if you want new vehicles. You may have various options within that period. 

How long can you finance a used truck for?

You can get longer hiring and leasing terms for new trucks compared to used trucks, due to them having a longer lifecycle and greater resale value. Older vehicles also come with greater risks of issues and likelihood of more regular maintenance needs. However, you can still typically finance used trucks for 1-5 years. 

Main UK truck finance providers

Take a look at the table below, which outlines some of the top truck finance providers in the UK, along with the type of agreements they offer and suitability considerations:

How iwoca can help with truck finance

Vehicle financing in the UK is a diverse playing field, as you can choose from new and used car, van, lorry and pick-up truck finance options using various hire and lease agreements. If you get stuck during your search for a suitable truck financing option, get in touch. We can offer guidance about suitable vehicle financing, business car lease agreements and funding for trucks and lorries.

While we don’t offer special truck finance or asset finance agreements, our flexible business loans enable you to cover the cost of key business vehicles, paying back the loan in manageable monthly instalments, aligned with your cash flow.

How to finance a truck or van with iwoca

Applying for an iwoca Flexi-Loan takes just a few minutes. The loan is designed specifically for SMEs, so we only require the basics about your business structure, performance and financing purpose to make a funding decision, which is usually given within 24 hours.

Benefits of our Flexi-Loans include:

• Fast access to funds – successful applicants can expect funds within a matter of hours after approval.
• Affordable monthly repayments – borrow up to £1 million for a few months or up to 5 years. 
• Flexibility – we tailor terms to your business needs, you only pay interest on what you draw down, and you can repay the loan early, free of charge.
  

Learn more about how to fund your vehicle needs with an iwoca business loan or use our loan calculator to get an idea of your likely repayments.