A pickup truck gives a boost to your business. If you need a truck for your business, purchasing it outright could be backbreaking. Thankfully, there are a couple of ways you can pay for your truck. When it comes to financing, it is crucial that you compare all available options to pick the best one.
Regardless of the financing model you opt for, it will cost you more money in total than an outright purchase. Because pickups are expensive and your business might not be in a sound condition to pay for its cost, you need to finance it.
Each of them has its own pros and cons. You should carefully weigh up your options, so you do not end up feeling the pinch. It is crucial to ensure that you are able to run your business smoothly without falling behind in payments.
Here are some of the best ways to finance your pickup truck:
- Hire purchase
Hire purchase is the most convenient method of financing a truck when you are unable to buy it outright. The agreement will allow you to make monthly payments for a set timeframe. Remember that it is not a kind of personal loan.
A hire purchase agreement will allow you to use the truck as you want, but you will not have ownership of it. You get the title when all the payments are made. The best part about this financing event is that you do not need to pay down any kind of balloon payment at the end of the contract.
However, if you are looking to get ownership right from the beginning, it is not an ideal option for you. Bear in mind that you still have to pay some money upfront, called a down payment. It is mostly about 10% of the value of a truck. Further, it depends on a dealer’s policy.
Monthly payments may not be too small. Make sure that your business’s operations will not be affected to keep up with payments.
- Lease finance
This kind of financing works better when you need to use a truck only for a short period of time. Until the contract ends, you will continue to pay a monthly sum, and then you can either buy it or trade it in for another truck.
Lease financing could be a cheaper alternative as it could allow you to access the latest models. However, it is subject to drawbacks as well. There could be some restrictions on modifications to be carried out and the mileage usage.
Most people think that lease finance and lease purchase are the same, but they are not the same. The lease-purchase agreement requires a down payment to be made at the beginning of the lease contract, as is the case with hire purchases. Afterwards, you will keep paying a sum of money every month until the contract terminates.
When the contract comes to an end, you are supposed to purchase the truck. Remember that you cannot miss any payments. If you do so, all payments will be confiscated, and you cannot own the truck.
- Personal contract purchase
A personal contract purchase is quite similar to a hire purchase, but it brings more flexibility. Like a hire purchase, you will have to pay some money. It is usually about 10% of the cost of your truck. However, in some cases, it could be about 15%.
Once you pay down the deposit, you are supposed to make regular payments over time. However, these payments will be much smaller than hire purchases. You would be paying only the interest with some restrictions about the mileage use.
If you cross that mileage, you will end up being imposed higher penalties. Unlike hire purchase, at the end of the contract, you can make a choice between these options:
1. You will return the truck
2. You will buy the truck by making a balloon payment
3. You will trade it in for another truck
If you are looking to buy the truck at the end of the contract, you should prefer a hire purchase to a personal contract purchase. This is because the latter will cost you a small fortune. The balloon payment you will make at the end of the contract to own it will be an extra cost.
It makes sense to trade it in for another truck if you use a personal contract purchase.
- Operating lease
If you need a truck for your business but you cannot afford aforementioned pick-up truck finance options, you should consider an operating lease. It is nothing but a rental agreement that allows you to rent a truck from a leasing company.
You will be allowed to use it the way you want but cannot get the title even at the end of the contract. The ownership will remain with the dealer. You are allowed to use a truck only in exchange for monthly payments called rent.
Though you are renting a truck, you will be responsible for most of the repair and maintenance work. You may also bear the cost of insurance. Many businesses have other debts, like a business loan with no guarantor, which can make it quite difficult to finance your truck. In this situation, you should consider renting. It will help save a lot of money.
The bottom line
There are many ways of financing a pickup truck. Still, you need to assess your financial situation carefully so you do not end up facing difficulty in keeping up with payments. It is worth noting all pros and cons, so you know what best suits your business.
For instance, if you do not need to own it, you should consider an operating lease. If you want a more flexible option but liberal with cost, you can consider a personal contract purchase. Take expert advice if you are unable to make a firm decision.
Talk to your accountant and finance manager to know how sound your business is. Propose to them what is in your mind to know their feedback. They might be able to help you gain true insight into your business.
Gary Weaver is a Senior Content Writer with having an experience of more than 8 years. He has the expertise in covering various aspects of business market in the UK, especially of the lending firms. As being the senior member, he contributes a lot while working at TheBusinessFunds, a reputed business loan broker.
Gary performs the major role of guiding loan aspirants according to their financing needs and also to write research based blogs for the company’s website. Previously, he has worked with many reputed business firms and therefore, he knows every nook and cranny of business financing market of the country. Gary is a post-graduate with having a degree of Masters in English language. He has also done post-graduate diploma in Business and Finance.