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Page written by Chris Godfrey. Last reviewed on December 4, 2024. Next review due April 6, 2026.
New business vehicles don’t come cheap and buying big ticket items like trucks, vans and bulldozers out of working capital can impact business efficiency and often be prohibitive. Fortunately, there’s a solution to this problem: Commercial fleet finance. Give your organisation the vehicles it needs without hurting cash flow.
Commercial fleet financing – also known as equipment financing – is a type of business loan used to support the purchase of one or more vehicles that are used for business purposes. Typically, this means vehicles such as:
Commercial fleet finance is effectively a long-term rental agreement, and it is usually employed to purchase or lease more than one vehicle at a time. This type of financing gives organisations an alternative way to pay for essential business vehicles without putting strain on working capital by buying vehicles with cash.
Commercial fleet financing can cover most of the cost of acquiring new vehicles for your business. Available in two main variants (see below), the financing will usually require a down payment from the buyer and then regular monthly payments over a fixed contract period. At the end of the contract, depending on which type of financing you choose, you’ll have the option to buy the vehicle for a pre-agreed price, renew the contract and keep using the vehicle, or give the vehicle back to the finance company.
There are two main types of commercial fleet finance:
An operating lease is a straightforward long-term rental. You pay a deposit and then regular monthly payments over a fixed-term contract. When the agreement comes to an end, the vehicle goes back to the finance company. This type of fleet financing may roll vehicle maintenance, servicing, insurance, even tyres into the deal. A mileage limit is set when taking out the contract. This is the maximum number of miles the vehicle can drive over the agreement period. If you go over, you will pay for every additional mile – which could significantly add to the overall finance cost if your excess mileage is high.
Similar to an operating lease, a finance lease is also a long-term rental, but you have different options at the end of the contract: You can give the vehicle back, renew the lease at a different cost per month, or buy the vehicle for the projected residual value of the vehicle at contract end – this is commonly known as a ‘balloon payment’. In finance leasing, vehicle maintenance, servicing and insurance costs are typically your responsibility. This may make your monthly payments lower, but you need to factor in the added third-party costs. Excess mileage charges also usually apply.
Obtaining commercial fleet financing is determined by three key factors:
You will need to provide a bill of sale for each vehicle you are seeking to finance, and the lender may also ask to see your business bank statements and other financial records. Depending on the strength of your application, your initial down payment may be as low as zero dollars, but this could rise to 20% of the vehicle price for applicants with weaker credit.
Like all business loans, commercial fleet financing has advantages and disadvantages.
Pros:
Cons:
The application process for most commercial fleet financing is straightforward:
You should shop around for different financing offers before settling on a deal. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of fleet financing deals from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for business owners who have never taken out commercial fleet finance before.
You will need to provide:
A determination is a pre-offer for fleet financing. It will set out the down payment, interest rates, fees, monthly payment and other conditions of the loan. If you accept these terms move on to:
Receive your approved finance package. This will include contracts containing each vehicle’s VIN as well as the complete terms and conditions of the financing. Sign and return the contracts along with any other paperwork, such as proof of insurance if not provided by the lessor.
Pay your down payment to the vehicle dealer and let the finance company take care of the rest. They pay the dealer the balance of the vehicle price and then it’s yours to drive away.
There are other ways to finance your essential business vehicles:
Working with business finance experts can make all the difference when applying for commercial fleet finance. Contact Swoop to discuss your borrowing needs, get help with your application and to compare top quality commercial fleet financing from a choice of lenders. Get the vehicles you need without putting strain on cash flow. Register with Swoop today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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