Business Blog - Huddle Business Capital

Guide to Commercial Vehicle Financing - Huddle Business Capital

Written by Derek Abel | January 21, 2025

If your company operates a van, truck, passenger vehicle, or other specialized vehicle for business purposes, you are likely aware of how costly they can be. In addition to the initial purchase price, these costs can encompass fuel, insurance, maintenance, and repairs, which can add up significantly over time. Furthermore, if you manage multiple vehicles or a large fleet, these expenses considerably impact your overall budget.

One way to outfit your business with a commercial vehicle or fleet of vehicles without depleting your business's capital is to explore financing options. Financing and leasing allow you to spread the cost of the vehicle(s) over time, which helps maintain cash flow and gives your business the flexibility to allocate funds to other areas. This Huddle Business Capital blog article features a guide to commercial vehicle financing; it explains what it is, how it works, and more.

What is a commercial vehicle?

Before we delve into the ins and outs of commercial vehicle financing, it is necessary first to define what constitutes a commercial vehicle. Simply put, a commercial vehicle is one that is used for transporting products, goods, equipment, or passengers for business purposes. This includes delivery trucks, vans, station wagons, buses, and vehicles like tow trucks, pickup trucks, and refrigerated trucks.

If you are unsure if the vehicle(s) you are interested in acquiring fall under the commercial vehicle category, consult an accountant or business attorney. They can help clarify how your intended vehicle use may affect its classification.

Establish a commercial vehicle budget.

Whether your business needs one vehicle or an entire fleet, having a well-defined budget plan for your purchase is essential. A budget outlines the cost to purchase the vehicle(s) and helps you understand how much you can afford. Start by evaluating your available financial resources. Calculate how much you can put toward the purchase and factor in additional expenses such as insurance, maintenance, fuel, and potential financing costs.

Lastly, compare purchasing options, such as financing or leasing versus buying, to see what works best for your business's budget, cash flow, and operational needs.

Choose a commercial vehicle.

Choosing the right commercial vehicle for your business can be challenging because so many options are available. Of course, you will need to select a vehicle that works with your budget. You can look online and/or visit commercial vehicle dealers in your area when shopping for vehicles. Visiting a dealership in person is beneficial because you can physically inspect the vehicle and take it for a test drive.

When finalizing your decision, consider factors such as the vehicle's size, capacity, fuel efficiency, and intended use, whether for delivery services or passenger transportation.

Commercial vehicle financing.

With this purchase option, you get funding, also referred to as an equipment loan, to finance a commercial vehicle and repay what you borrow, plus interest and any associated fees, over a predetermined time frame. Financing helps you free up your cash flow and keep your credit line open while gradually owning the vehicle outright. Most lenders that offer commercial vehicle financing use the vehicle as collateral, which helps minimize their risk. Some lenders, such as Huddle Business Capital, offer up to 100% financing.

Commercial vehicle leasing.

Leasing is another option worth considering if you want to avoid a large one-time purchase. When you lease a commercial vehicle or fleet, you are "renting" the vehicle(s) throughout the length of the lease agreement and making monthly payments. Commercial vehicle leasing term lengths vary by lender but usually range from 12 to 72 months. Depending on the type of lease you enter, you can either renew the lease, return the vehicle(s), or buy the vehicle(s) at the fair market value (FMV) once the lease ends.

Potential tax benefits.

Many types of light commercial vehicles (gross vehicle weight rating under 6,000 pounds) and heavy commercial vehicles (gross vehicle weight rating between 6,000 pounds and 14,000 pounds) are eligible for the Section 179 tax deduction. The Section 179 tax deduction applies to all purchase types—buying, financing, and leasing—so long as the vehicle qualifies for Section 179. This can provide nice-sized tax savings for your business, so discussing the eligibility criteria with your accountant is highly recommended.

Disclaimer.

This Huddle Business Capital blog article is purely educational and contains general information and opinions; it is not intended to provide advice or recommendations of any kind.