What is HGV Finance?
HGV’s are essential to many businesses, from construction to logistics and transportation. However, buying a truck outright can be a significant expense, and not all businesses have the cash on hand to make such a purchase.
This is where HGV finance comes in, offering businesses the option to finance the purchase of a vehicle through a loan or lease agreement.
In this blog, we will explore HGV finance in more detail, including the different options available and the benefits and drawbacks of each.
Types of HGV Finance
There are two primary types of HGV finance: loans and leases.
HGV Loans: A truck loan is a financing agreement in which a lender provides funds to a borrower to purchase a truck.
The borrower will then pay back the loan over an agreed-upon term, usually with interest.
The loan may be secured, meaning the truck is used as collateral, or unsecured, meaning the loan is based on the borrower’s creditworthiness.
HGV loans are typically offered by banks and other financial institutions, and they may require a down payment or other fees.
HGV Leases: A truck lease is a financing agreement in which a lender provides a truck to a borrower for a set period of time, usually between two and five years.
The borrower will make regular payments during this time, and at the end of the lease term, they may have the option to purchase the truck or return it to the lender.
There are two primary types of truck leases: operating leases and capital leases. An operating lease is a short-term lease in which the borrower pays for the use of the truck but does not assume ownership.
A capital lease, on the other hand, is a long-term lease in which the borrower assumes ownership of the truck at the end of the lease term.
Benefits
The key benefits for the business include:
- Reduced upfront costs: By financing a truck, businesses can spread the cost of the purchase over time. This helps with reducing the upfront expense.
- Improved cash flow: Financing a truck through a loan or lease allows businesses to preserve their cash flow.
- Tax benefits: Businesses may be able to claim tax deductions for the interest paid on a truck loan or lease.
- Up-to-date equipment: By regularly upgrading their trucks through leases or loans, businesses can ensure they are using the most up-to-date and reliable equipment.
Drawbacks
While there are several benefits to HGV finance, there are also some drawbacks to consider, including:
- Interest rates: Depending on the lender and the borrower’s creditworthiness, interest rates on truck loans and leases can be high. This can add overall costs of the purchase.
- Hidden costs: Some lenders may include additional fees in their financing agreements, such as application fees or early termination fees.
- Depreciation: As with any vehicle, a HGV value will depreciate over time. This could mean that the borrower may end up owing more on the loan than the HGV is worth.
- Limited flexibility: Depending on the terms of the financing agreement. Borrowers may be limited in their ability to modify or upgrade the truck
Conclusion
HGV finance can be a useful tool for businesses looking to purchase a vehicle without incurring a large upfront expense. Whether through a loan or lease agreement, truck finance offers several benefits, including reduced upfront costs and improved cash flow. However, businesses should also be aware of the potential drawbacks, such as high interest rates and hidden fees.
Businesses should carefully consider the options by working with a Commercial Finance broker. This allows the business to make a informed decision about whether obtaining finance is right for them.
How to apply for HGV Finance?
Applying for Finance is very simple. Enter your details below or call 0161 8211478 to speak with one of our specialists.
