Call us on 01442 793124 | Email us

A Guide To Vehicle Finance

These days, most businesses pay for their vehicles through a financial plan, rather than buying them outright. This is because vehicles are expensive and financial agreements can be more tax efficient. The problem is that vehicle finance can be complex because there’s so much to consider. In this section, we’ll help you to understand more about how car finance works, why car finance works, and what car finance is best for you and your business.







These are the most important factors that will influence your car or van purchase decision:

Each type of vehicle finance plan has its benefits and downsides regarding monthly payments and total costs, flexibility, and tax implications. So, before you make your decision, it’s crucial to seek professional advice to ensure the method you choose is right for you and your business.

The information here is just an introductory guide, and you shouldn’t use it to make your final decision. For independent advice to help you make the right decision, contact Ram Automotive today.


Long-term rental is a flexible way to get on the road and your agreement can be for as little as a few months. You’ll probably need to pay at least three months’ rent upfront, initially –
followed by fixed monthly payments. Your monthly payments will be based on the vehicle you choose, your likely mileage, how long you want the vehicle for, and any extra services you need – such as servicing, maintenance and repair. When the contract is over, you simply return the vehicle. Your business won’t ever own the vehicle, and you can’t buy it at the end of the contract.

Leasing is a bit like long-term rental. But typically you agree to use the car for a longer time – for between two and five years, rather than possibly just a few months. Leasing is great for those looking for fixed-cost motoring and to drive something they couldn’t otherwise afford. After paying your deposit, you make fixed monthly payments, which essential cover the depreciation on the vehicle. Your payments will be based on the vehicle you choose, how long you want it for, and your likely mileage. Leasing tends to be more cost-effective than long-term rental. Reasons for this include likely tax benefits and the fact that the monthly payments reflect depreciation. Once the leasing term has finished, you will not own the car – but in some cases, you will have the option to buy it.

This type of leasing is aimed at businesses that want to keep monthly payments lower than for a typical standard lease. You pay a deposit and make your lower fixed monthly payments as you would with a standard lease. At the end of the agreement, the vehicle is yours once you make an additional ‘balloon payment’. You don’t have the option of handing the vehicle back, although you can put the equity you already have in the vehicle towards a deposit on a new one.
This is a relatively straightforward type of loan. Your vehicle will initially be owned by the HP company. Your will pay a deposit (normally at least 10% of the cost of the vehicle), then make fixed monthly payments which will include interest on the loan. Once you have made all the payments, your business will own the car.
A PCP is similar to leasing. You pay a deposit and a fixed monthly payment which essentially covers the depreciation on the vehicle. At the end of the contract, you can choose to buy the vehicle (you’ll usually have to make a substantial extra payment to do this), return it, or start a new deal. Unlike leasing, this finance plan is usually only available to private individuals, sole traders, and the self-employed.
With a Finance Lease, a finance company buys the vehicle and leases it to you. You pay an initial fee, which is often just a month’s payment, so is relatively small. Then you make fixed monthly payments, as you would for most other vehicle financing deals, usually for between two and five years. At the end of the contract, your business won’t own the vehicle or have the option to buy it. You will have to sell the car to cover any outstanding payment. Or you can pay a final amount and keep using the vehicle for a reduced monthly cost.
Scroll to Top