How to finance your truck
Demand for new trucks in the UK rose for the second year in a row in 2023, increasing by 13.5%. If you work in logistics, transportation, manufacturing or construction, you know how critical reliable trucks are to keeping the operations of entire industries functioning smoothly, particularly as supply demands increase both seasonally and due to market factors.
But what if, like many, you don’t want to pay outright for the truck you need to keep business performing well? Enter: truck finance.
What kind of financing agreement do you need?
It can be helpful to approach lenders with a clear understanding of your needs. This can prevent misunderstandings and can stop you from taking out too much or too little finance. Consider if you would like to refinance your current truck, use your current truck as an asset with which to gain funding, or, if you would like access to a new or used truck (or fleet of trucks) in exchange for a monthly fee. This will impact which lenders are accessible to you and the type of funding agreement you are eligible for.
Take some time to assess your affordability. Many business owners choose to put together a budget. This might include a mini cash flow projection with expected operating costs subtracted from future revenue. The final number might help you understand how much you can afford to pay each month, which could help ensure you get finance that best suits your needs.
Importantly, you’ll want to consider whether you want to buy the truck or enter into a business vehicle lease. Buying gives you ownership over the truck at the end of the term but the monthly costs are usually higher and the loan term is often longer. Leasing, on the other hand, usually involves a smaller monthly cost but often includes restrictions over how the truck can be used, for instance, leasing may involve restrictions around modifications or mileage.
Find a lender or leasing provider
The next step is to find a lender or leasing company. You can do this with the help of a broker like Funding Options by Tide. We work with over 120 lenders offering between £1,000 to £20 million in a wide range of finance types. We can let you know if you’re eligible for truck finance, and if so, we may be able to connect you to suitable lenders willing to extend the funding.
Beyond lenders and leasing providers, dealerships often offer agreements that enable you to spread the cost of the purchase. Once you’ve approached lenders, compare and contrast the offered interest rates and loan terms to find the most suitable one for you. Many lenders and business brokers can let you know how likely you are to be approved for finance before you apply.
Apply for truck finance
Applying can usually be done directly with the lender. Many lenders accept online applications submitted through their portal. Some lenders accept telephone or in-person applications. Lenders often ask for a few essential pieces of documentation, such as information on your business and a passport or driver’s license. You may be asked for financial statements or a business plan, particularly if you’re applying for finance for a fleet of trucks.
The lender will let you know if you’ve been approved or rejected. If you are rejected, consider using a broker or requesting pre-approval before applying elsewhere, so you don’t end up with too many hard credit checks on your credit record. If you’re approved, the lender will likely take details of a payment account from which they can withdraw the agreed monthly repayments. Make a note of this date so you can prepare each month and ensure you stay on top of your bills.
Can I finance a truck I already own?
Yes, this is called truck refinancing or asset-based finance.
If you already own the truck outright, the lender extends funds to you in exchange for monthly payments on your end with the addition of interest. This can help free up cash flow which can be used for maintaining the truck, paying for petrol, or other essential business costs. The truck is used as collateral for the asset-based loan and you are free to keep using the truck while you repay the loan. Do be aware, defaulting on a secured business loan of this type can result in the asset being repossessed.
If you do not own the truck outright, you can refinance the truck. This is particularly useful if standard interest rates have dropped since you first took out the loan, if your needs have changed and you want to pay more or less per month, or if you want to change the truck you are currently driving for a newer model. This can also be helpful if your creditworthiness has improved since you took out the loan, meaning you may get a better rate now.
To refinance your truck, first speak to your current provider. They may offer you a settlement fee, they may charge you early repayment fees, and they may even offer to provide the required refinancing funding to you themselves. After that, approach lenders to find the best interest rates or loan terms before applying. A broker, like Funding Options by Tide, could help you find the most suitable loan terms available, since they have access to a wide range of lenders offering a variety of loan terms.
