Buying a commercial vehicle, all you need to know. - Anglo Scottish Finance

Buying a commercial vehicle, all you need to know.

02nd February 2022

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For a small/medium-sized business buying a van or commercial vehicle can be a fantastic investment and one of the most important decisions a business owner can make.

But with the massive choice of vans and commercial vehicles available, how do you know which option is right for you and your business?

Things to consider before buying a commercial vehicle

New or second-hand

There are many pros and cons for new vs used commercial vehicles. Used vans are usually available very quickly and can be purchased from stock, whereas new vehicles may take several weeks or even months to be delivered.

Engine

You’re likely to be doing a lot of miles in your commercial van, and need to choose the right transmission for your expected mileage. With the increasing focus on diesel engines and the government’s clean air scheme, you may want to consider a more environmentally friendly option?

Hybrid – Hybrid electric vehicles are powered by an internal combustion engine (usually petrol) and an electric motor, which uses energy stored in batteries. Hybrids have been around for a number of years and the technology is continuing to improve with each new model.

Electric – Powered completely by battery, electric vehicles must be into a charge point to function. The technology is still relatively new, and many potential owners face issues trying to charge their vehicles as charging points are still few and far between. Grants are sometimes available to install charging points, but this might not always be the case.

Petrol – Petrol engines are a popular choice for many small to medium-sized vans, they use spark plugs to ignite the air-fuel mixture and power the vehicle.

Diesel – A popular choice for vehicles that need to travel long distances or require power for towing or handling heavy loads, they have fallen out of favor in recent years due to their high emissions, and all sales of new diesel vehicles are expected to be banned in 2030.

Size

Commercial vehicles come in all shapes and sizes,  it’s important to know what you plan to transport before making your choice. Van’s are classified as follows:

  • City van: The general term used for most small vans. These typically weigh less than 2.5 tonnes and can carry around 700kg. Examples include the Ford Transit Courier, Citroen Berlingo, and Peugeot Partner.
  • Mid-sized van: These are the most common type of van on our roads, with the most popular being the Ford Transit Custom.
  • Large van: Usually referred to as 3.5-tonne vans; models include; the Mercedees Sprinter, and Volkswagen Crafter.

Type of Van

Depending on your usage, you may choose to go for one of the following types of commercial vehicles:

  • Panel van: This is the general term used to describe vans. They have solid metal sides and doors that open at the rear and side.
  • Crew van or double cab: A van with additional seats. They usually have a fixed bench in the second row with a solid bulkhead behind them.
  • Box van: This type of van has a big square load space that’s ideal for carrying bulky items.
  • Tipper: Used in the construction trade, tipper vans have a hydraulic ram under the load bed to eject materials from the rear
  • Dropside: Similar to a tipper van, dropside vans have hinged gates on the side. This allows easy access to the load. They tend to be used by gardeners who need to unload machinery, and by the building trade who want to be able to load pallets on the side of the bed.
  • Pickups: A pickup truck is a popular and attractive-looking choice if you’re looking for a commercial vehicle.  They have an enclosed cabin with an open cargo area with low sides and a tailgate and are usually 4 x 4. Available with either a single cab, or extended cab, they offer a versatile open for small and medium-sized businesses. Examples include Toyota Hilux, Mitsubishi L200, Ford Ranger, and Nissan Navara.
  • Flatbed: A flatbed van is one with a simple flat load deck area without sides, again used commonly by the construction industry for easy loading.
  • Luton van: Used most commonly by removal services, the Luton van is a box van that has a useable storage area above the cabin.
  • Curtainside van: These vans look like small trucks. They have a solid roof with canvas or plastic-coated curtains along the side to allow for forklift trucks to be load goods from the side.
  • Car-derived van: This is a van that is based on a car. These small vans have a low carrying capacity but are ideal for small businesses that only need to carry a few items.

Budget

Do you have a specific budget in mind? Depending on the size of the van, costs can vary from a few thousand pounds to £40,000 plus, not to mention the maintenance required to keep your vehicle safe and roadworthy.

Financing your new commercial vehicle

Not every business owner can afford, or even wants to buy and pay for a van outright, but fortunately, there are many options available to finance both new and second-hand commercial vehicles:

Hire Purchase – This is an agreement that allows an instalment payment plan with regular monthly payments. You have use of the vehicle while you’re paying for it but won’t own the van until the final payment has been made. There is also likely to be a small ‘option to purchase fee before you become the legal owner of the van.

Business Contract Hire – Business contract hire is a popular long-term vehicle rental agreement used by sole traders, partnerships and limited companies. This agreement allows you to rent the vehicle and pay in monthly instalments for a fixed term. Once the contract term is finished, the vehicle is returned to the leasing provider.

Finance Lease – With this type of agreement, the lender purchases the vehicle on behalf of your business and you make regular payments over the term of the contract to the lender. The lender will retain ownership vehicle while your business uses it. This may be a good option for businesses who want to avoid making a large purchases.

Lease Purchase – This agreement is an option many businesses make use of if they eventually wish to own the vehicle, but either can’t afford to pay for it out right to begin with, or don’t want to. With this type of agreement you will pay an initial deposit, then monthly payments until the end of the agreed contract. The deposit and monthly payments are worked out using the retail value of the vehicle, the length of contract, and the estimated residual value of the vehicle at the end of the contract. At the end of the agreement, you will pay a final balloon payment in order to take ownership of the vehicle.

Terms to know when looking for van finance

Term – This is the agreed time in years or months by which you will have paid back the loan.

Total amount payable – This is the total amount you will have paid by the end of your term.

Balloon payment –The balloon payment is the payment at the end of the term that secures your ownership of the vehicle, this applies to Personal Contract Purchase or PCP agreements.

Credit agreement – This is the official document you get given and will contain all the details of the agreement between yourself and the lender.

Credit score or rating – This is a rating that lenders use to decide if you’re eligible to be offered a loan. The score is based on your financial situation and previous borrowing. It will consider past or current debts and if you have loans or credit cards. It’s best to be upfront if you think you’re rating may be low, there are still funders who can help secure you an agreement.

Mileage allowance – This is the maximum amount of miles your agreement allows. The amount of miles you are expecting to do will influence the loan variables’ rates. If you exceed the mileage allowance you may be charged for “excess mileage”.

Minimum Guaranteed Future Value – This is the minimum value that your van will be worth at the end of the agreement. It will affect aspects of your agreement, such as interest rate, monthly payment amount, and the balloon amount (if you have signed up to PCP)

If you are looking to purchase a new or used commercial vehicle, contact our team today to discuss your options.


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