Used van and commercial vehicle finance for limited companies
How finance works when your business is buying a used van, pickup, truck or HGV: the agreement types, what lenders look at, and what changes when you buy from a dealer, an auction or a private seller.
The short answer
A limited company can usually finance a used commercial vehicle on hire purchase or a finance lease, from a dealer and often from an auction or private seller too. The lender looks at your business, the vehicle’s age, mileage and value, and where you are buying it from. An older vehicle may simply mean a shorter term rather than a refusal.
Hire purchase or finance lease for a used vehicle?
Most used commercial vehicles are financed one of these two ways. The main differences are ownership and how VAT is paid.
| Question | Hire purchase | Finance lease |
|---|---|---|
| Who owns the vehicle? | You do, once the final payment (and any small option-to-purchase fee) is made. | The lender owns it. At the end you can keep using it on a low secondary rental, or it is sold and you usually receive most of the proceeds. |
| VAT | VAT on the full price is normally paid upfront with the deposit. It can sometimes be deferred for up to 3 months. | VAT is added to each rental, so less is needed upfront. |
| Balloon payment | Optional. A larger final payment based on the expected value of the vehicle lowers the monthly cost. | An optional final rental can be used in a similar way. |
| Often suits | Businesses that want to own the vehicle and keep it for most of its working life. | Businesses that want to keep cash in the business or prefer not to own the vehicle. |
For a fuller side-by-side, including contract hire, see hire purchase vs finance lease vs contract hire.
What lenders look at on a used vehicle
New vehicles are straightforward for lenders to value. With a used vehicle they want to be comfortable that it will hold enough value over the agreement, so they look at the vehicle as well as your business:
- Age at the end of the agreement. Many lenders set a limit on how old the vehicle can be when the last payment is made, so an older van may be offered over a shorter term.
- Mileage and condition. High mileage is common on commercial vehicles and isn’t a problem in itself, but it affects the value the lender will lend against.
- Price against market value. Lenders check the price is in line with what similar vehicles sell for.
- Where you’re buying it. Dealer purchases are the simplest. Auction and private sales are possible with fewer lenders and some extra checks.
- Your business. Trading history, recent bank statements, company accounts and the directors’ credit history.
Dealer, auction or private seller
From a dealer
The widest choice of lenders. The dealer provides the invoice, the lender pays them directly, and VAT is usually shown on the invoice.
From an auction
Possible with some lenders. Timing matters because auctions want payment quickly, so it helps to talk to us before you bid, not after.
From a private seller
Fewer lenders, and expect checks on ownership and outstanding finance. If the seller isn’t VAT-registered there’s usually no VAT on the price.
An illustration
To show how the numbers fit together, here is a used van on hire purchase with VAT paid upfront. The figures are made up for illustration and are not a quote.
Used van, 3 years old, bought from a dealer
- Price (ex. VAT)
- £18,000
- VAT at 20% (paid upfront, usually reclaimable)
- £3,600
- Deposit, 10% of the price
- £1,800
- Amount financed
- £16,200
- Term
- 48 months
The monthly payment depends on the rate the lender offers your business. If the VAT were deferred instead, the upfront payment would be the deposit only, with the VAT repaid in a single payment a few months later.
How it works with DCF
- Tell us about the vehiclePrice, age, mileage, and who you’re buying it from. A listing link is fine.
- We send you a quoteHire purchase or finance lease, with the deposit, VAT and monthly figures set out.
- Accept and upload documentsUsually recent bank statements, company accounts and ID for the directors, uploaded through a secure link.
- Lender decisionWe present the application to suitable lenders and come back to you with the decision.
- Sign and collectOnce you sign, the lender pays the seller and the vehicle is yours to use.
Frequently asked questions
Can a limited company get finance on a used van?
Yes. Used vans, pickups, trucks and HGVs are commonly financed for limited companies, usually on hire purchase or a finance lease. The lender will look at the business, the directors and the vehicle itself, including its age, mileage, value and where it is being bought from.
How old can the vehicle be?
It depends on the lender and the type of vehicle. Many lenders look at how old the vehicle will be at the end of the agreement rather than today, so an older vehicle may simply need a shorter term. We will tell you early on if age or mileage is likely to limit your options.
Do I need a deposit for a used commercial vehicle?
Usually some deposit is expected on hire purchase, and VAT is normally paid upfront too unless it is deferred. The amount depends on the lender, the vehicle and your business. A finance lease often needs less upfront because VAT is added to each rental instead.
Can I finance a vehicle bought from an auction or a private seller?
Often, yes, although fewer lenders will fund private and auction purchases than dealer sales, and they may ask for extra checks such as proof of ownership, a history check or an independent inspection. If a private seller is not VAT-registered there is usually no VAT on the price at all.
Is there a minimum amount I can borrow?
Some lenders set a minimum agreement size, but smaller used vehicle deals are regularly financed. Tell us the price and we will match it to lenders that work at that level.
Will the directors need to give a personal guarantee?
Sometimes. Lenders often ask directors of younger or smaller limited companies to guarantee the agreement. Whether one is needed depends on the lender and the business, and we will make clear before you sign if one is required.
Can sole traders or partnerships use DCF?
No. Direct Commercial Finance works with limited companies only.
Related guides
Found the vehicle?
Send us the details and we'll come back with the finance options for your business. It takes a couple of minutes.
Get a Quick Quote →Direct Commercial Finance Ltd is a commercial finance broker, not a lender, working with UK limited companies. Finance is subject to status and lender approval.