FINDER’S PICK
- No hard credit check to use
- Funding Advisor provides products tailored to your business
- Funding as fast as 1 business day
- Required time in business: 6+ months
- Required annual revenue: $60,000+
- Min credit score: 550+
- No hard credit checks
- Highly rated by past customers on Trustpilot
- Funds available in as soon as 24 hours
- Required time in business: 1+ years
- Required annual revenue: $120k+
- Min credit score: 580+
- Personalized, fast funding within 24 hours
- Zero impact to your credit
- Simple application process
- Required time in business: 6+ months
- Required annual revenue: $180k+
- Min credit score: 525+
What Are Commercial Vehicle Loans?
Commercial vehicle loans are financing options specifically designed for businesses looking to purchase or lease vehicles used for business purposes. These loans help companies acquire everything from delivery vans and trucks to service vehicles and specialized equipment. Unlike personal vehicle loans, commercial vehicle loans are tailored to the unique needs of businesses and are often secured by the vehicles themselves.
These loans come with varying terms, interest rates, and down payment requirements. It’s important to understand the details before applying to ensure you get the best deal for your business needs.
Common Uses for Commercial Vehicle Loans
Commercial vehicle loans are versatile and can be used for various purposes. They provide a way for businesses to obtain the vehicles they need without the upfront cost. Below are some common uses for these loans:
- Fleet purchases. Businesses that rely on a fleet of vehicles for operations can use commercial vehicle loans to acquire or expand their fleet, ensuring they have reliable transportation for delivery, services, or operations.
- Vehicle upgrades. Companies may use loans to replace aging vehicles with newer models to improve efficiency, reduce maintenance costs, and comply with regulatory requirements.
- Specialized vehicle needs. If your business requires vehicles with specific equipment (such as refrigerated trucks or dump trucks), a commercial vehicle loan can help fund these specialty vehicles.
- Expanding service offerings. Companies offering mobile services may need commercial vehicles to expand their service areas or increase their capacity.
Average Down Payment for a Commercial Vehicle Loan
Down payments for commercial vehicle loans typically range from 10% to 30% of the vehicle’s purchase price. The exact amount can vary depending on the loan type, the financial profile of the business, and the lender’s requirements. Generally, the higher the down payment, the better the loan terms, as it reduces the lender’s risk and may result in a lower interest rate.
Types of Commercial Vehicle Loans
There are several types of loans available for commercial vehicles, each with different features and benefits. Here are the most common types:
| Commercial Vehicle Loan | Purchase or lease standard commercial vehicles for business use | 3 to 7 years | Vehicle(s) purchased with the loan | $25,000 to $500,000+ | 4% to 10% (fixed or variable) |
| Lease-to-Own Loan | Lease a vehicle with the option to purchase at the end of the term | 3 to 7 years | Vehicle being leased | $15,000 to $500,000+ | 4% to 12% (fixed or variable) |
| Chattel Mortgage | Loan that allows businesses to own the vehicle outright after purchase | 3 to 5 years | Vehicle(s) purchased with the loan | $25,000 to $500,000+ | 6% to 10% (fixed or variable) |
| Commercial Fleet Financing | For businesses purchasing multiple vehicles as part of a fleet | 3 to 7 years | Fleet vehicles | $100,000 to $10M+ | 5% to 8% (fixed or variable) |
How to Apply for a Commercial Vehicle Loan
Applying for a commercial vehicle loan is similar to applying for other types of business loans, but with a focus on the vehicle purchase. Here are the steps you need to follow:
- Determine your budget. Assess how much you can afford to borrow, factoring in your business’s revenue and any existing debts.
- Choose the right loan type. Decide if you need a traditional loan, a lease-to-own option, or a fleet financing plan based on your business’s needs.
- Review your business finances. Lenders will look at your business’s credit score, cash flow, and debt-to-income ratio. Strong financials improve your chances of securing a loan with favorable terms.
- Gather necessary documents. Lenders will require your business tax returns, financial statements, business plan, and details on the vehicle(s) you plan to purchase.
- Shop around for lenders. Compare terms, rates, and fees from banks, credit unions, and online lenders to find the best deal.
- Submit your application. After reviewing your documents, submit your loan application to your chosen lender. Be prepared to provide additional information if requested.
Pros and Cons of Commercial Vehicle Loans
Commercial vehicle loans are an effective way for businesses to obtain the vehicles they need, but like any financial product, they come with benefits and drawbacks.
Pros
- Flexible financing options. You can choose from a variety of loan types, including purchase loans, leases, and fleet financing, to suit your needs.
- Improves cash flow. Spreading out payments over time allows businesses to maintain cash flow while acquiring essential vehicles.
- Tax benefits. Interest paid on commercial vehicle loans may be tax-deductible, helping lower the overall cost of borrowing.
- Builds business credit. Successfully repaying the loan can improve your business credit score, helping you secure future financing at better terms.
Cons
- Collateral risk. If you fail to repay the loan, the lender can seize the vehicle(s) used as collateral.
- High down payment. Commercial vehicle loans often require a larger down payment compared to personal loans, typically ranging from 10% to 30%.
- Interest rates can be high. Depending on your credit and the loan terms, the interest rates on commercial vehicle loans may be higher than for personal loans.
- Impact on cash flow. Regular loan payments can affect your business’s cash flow, especially if the loan term is long.
