The haulage industry is vital for helping with distribution across the globe. Many businesses would be unable to transport their goods to the desired destination without trucks, lorries or HGVs.
Purchasing new vehicles can help to widen your operations, helping you expand beyond your own country where applicable. However, not everyone’s got a spare £100,000+ in their bank account and the cash flow to finance the running operations too.
However, that shouldn’t stop you from growing and expanding the business. Sometimes finance options for these HGVs can be just what you need to earn more.
So what finance is available for a haulage business? How do you go about getting the financing, and what options are available? This will all be explained in this article, so buckle up.
Truck, Lorry and HGV Finance Explained
This type of finance can help fund the purchase of heavy goods vehicles in order to help increase the profits within your company. For many businesses, it’s not possible to purchase a new truck outright from their own capital.
Heavy goods vehicles can be anything from light goods vehicles and light commercial vehicles like vans or pick-up trucks. These vehicles typically have a certain gross weight that classes the vehicle as an HGV.
A vehicle designed to carry goods isn’t cheap to purchase or run, for that matter, so having finance options can certainly help make those payments ahead of time.
How Can I Get HGV Finance?
HGV finance can be acquired by approaching lenders that offer or specialise with this type of finance in particular. Once you’ve got an idea of what HGV you’re after, you can then apply for finance, with most lenders being able to check that you’re eligible within a matter of minutes.
You’ll be required to fill out an application form which, after being reviewed, will either be approved for finance or not. At that point, the agreement is made, and you’ll then get the money to finance the HGV.
Truck and HGV Financing Options
There are a number of truck and HGV financing options to pick from. Knowing what these are can help you make a more informed decision on which one is best for your business needs and for the vehicle you’re purchasing.
Hire or lease purchase
What is a hire or lease purchase?
Hire or lease purchase is a type of finance where you use the finance to effectively rent out the vehicle in question. This is offered in two parts, either via hire purchase or lease purchase.
How does hire or lease purchase work?
Hire purchase is hiring the truck for a fixed cost and over a fixed period of time. You’ll then have the opportunity to purchase the truck or lorry at the end of your contract. Lease purchase is very much the same, but with this, you’ll have a balloon payment towards the end of your contract.
How much does hire or lease purchase cost?
It’s important to be aware that for these finance options, you’re going to be responsible for the maintenance and upkeep of the vehicle.
The pros and cons of hire or lease purchase
Pros: Cheaper monthly repayments.
Cons: Whilst these are great for saving money or making your monthly repayments cheaper, you don’t own the vehicle until you’ve paid off the final payment. The reduction of monthly payments makes that balloon payment at the end hard to pay off for some.
Contract purchase
What is a contract purchase?
A contract purchase helps manage the depreciation that comes with vehicles in general.
How does contract purchase work?
With a contract purchase, your repayments will cover the additional depreciation of your vehicle’s value. That way, you’re paying towards a lower estimated value of the truck in the future. You can then return the vehicle, or you can buy it with a final payment at the end of the contract.
How much does contract purchase cost?
With this type of truck finance, you’ll likely pay a bit more on the monthly repayments to help cover the depreciation.
The pros and cons of contract purchase
Pros: Helps spread the cost over a number of years. Easier to apply for.
Cons: Contract terms can be much longer, and there may be a higher total cost involved.
Finance lease
What is a finance lease?
Finance leases simply cover the monthly repayments to protect the truck’s sale price.
How does a finance lease work?
Whilst contract hires give you the opportunity to buy the vehicle at the end, you won’t be allowed ownership of this truck by the end of your lease. However, you can sell the truck on behalf of the leasing company or continue the lease at a lower repayment rate.
How much does a finance lease cost?
There are no upfront costs with this type of lease, and you’ll only be paying to maintain the price of the truck.
The pros and cons of finance lease
Pros: No balloon payments or significant payments to make at the end of the lease.
Cons: Not possible to own the truck or HGV at the end of the lease period. The monthly repayments might not be as cheap.
Operating lease
What is an operating lease?
Residual value comes back into play with this type of lease. With an operating lease, you’re hiring the truck for a shorter period of time.
How does an operating lease work?
Unlike the other leases, you only have the truck for so long. Leasing companies will be able to re-lease these HGVs or sell the truck at the residual value once the contract ends with you.
How much does an operating lease cost?
As far as the operating lease goes, the only cost you pay is to rightfully use the vehicle. You’ll be required to pay maintenance costs, but any risks or benefits remain with the lender.
The pros and cons of an operating lease
Pros: No ownership over the vehicle. Ideal for those who need short-term use of an HGV.
Cons: Short-term leases mean more hassle to find others if you need them for a longer period of time.
Contract hire
What is a contract hire?
Contract hire is very much like an operating lease. The difference is the lease arrangement can often have additional extras that are optional but available.
How does a contract hire work?
The leasing company offers this as a similar but alternative finance to operating leases. The contract hire gives the borrower a few extra options, such as having the leasing company cover depreciation costs, maintenance costs, etc.
How much does a contract hire cost?
You’ll be required to make monthly repayments, but the optional extras are likely going to increase your payments in some way.
The Pros and Cons of operating lease
Pros: Flexibility in your contract details and what you include within the contract itself.
Cons: Increased payments due to added extras.
Do I Qualify for Truck and HGV Finance?
Does you or your business qualify for truck and HGV finance? Let’s look at the options you have and what eligibility you’ll require for each.
Hire or lease purchase
For hire and lease purchases, you’ll usually need an excellent credit score to qualify. These are typically used for those who require a new rather than a second-hand truck.
Contract purchase
Contract purchases are likely to ask you for more background of your income and your credit history or previous experience of being signed into contracts for longer periods of time.
Finance lease
Leases like this one will once again need you to have a good credit score in order to get access to some of the better truck finance lenders, regardless of the motor vehicle you’re looking at purchasing.
Operating lease
As the ownership remains with the lender, there’s less you’ll need in terms of eligibility and qualifying for this one. Other than the good credit score, of course!
Contract hire
Another one that’s reliant on a good credit score, but you also must be able to afford the monthly repayments.
How to Apply for Truck and HGV Finance
Applying for truck and HGV finance is easy to do. When you’ve found the right HGV for you, you’ll then need to pick the lender. Apply with that lender and follow the instructions in order to provide all the relevant information that’s required.
As soon as this is approved, you’ll get your truck finance – it’s as easy as that!
Can I Get Truck and HGV Finance If I Have a Bad Credit Rating?
Most mainstream lenders won’t look at you twice if you have a bad credit rating. However, that isn’t to say there’s not a wealth of lenders out there that can help beyond the main providers.
Of course, with any loan that you apply for, with bad credit ratings, you’re likely to be frozen out of a lot of opportunities. It’s always good to try and improve your credit score where you can in order to have more affordable loan options.
With a bad credit rating, it not only reduces your options but it makes your repayments more expensive. If you’re struggling, it’s good to look at a broker to help you find one.
Who Offers Truck and HGV Finance?
High-street lenders can offer this type of finance, and as long as you’ve got good credit ratings, you should be fine. However, there’s a world of lenders to explore beyond the high street that you can research online.
If you’ve not got the time or the skills to source out the right finance options for your business, then there’s always a broker that can help you. These professional financial advisors can help you find the perfect business finance for your HGV requirements.
Choosing the Right Truck and HGV Finance Option
Choosing the right truck and HGV finance option will take some digging. Simply going to the first lender you see is not necessarily going to be the best one for you. With that being said, make sure you take a good look at what truck finance is available across the market.
Commercial trucks aren’t like buying a piece of equipment for the office, they can be very costly, and they can cost a lot more if you choose the wrong lender.
Either do the research to get a broad overview of what you can get or seek the services of an independent broker.
Final Thoughts
For such expensive vehicles, truck finance seems to be the best option for most businesses in the market for this business transport. Make sure you assess all the options you have and the types of business finance available before you make a decision.
FAQs
How soon can I receive a truck and HGV loan?
The amount of time it takes to receive a truck and HGV loan will depend on the lender you’re using and how quickly they can get the finance to you. It also depends on where you’re purchasing the truck or HGV from.
How long can you finance a truck?
Financing a truck tends to be slightly different from the repayment terms you’d get with other vehicles like cars and motorbikes. There’s no standard length, but operating leases can be between 1-2 years and hire purchases are five years or more before the truck becomes an owned asset.