Running a business involves various operational costs, and one major expense is accounted for the purchasing of commercial vehicles. Whether your business delivers goods, provides certain services, or manages a fleet, these vehicles are essential for important logistic operations. Buying a commercial vehicle outright can be expensive due to the large upfront payment required. This is where a Commercial Vehicle Loan comes in, it is designed to help you purchase vehicles for commercial purposes with affordable financing options for both new and used vehicles. Read this blog to the end to know about the benefits of financing a commercial vehicle as a smarter choice for your business.
Types of Commercial Vehicle Loans
Most lenders offer two types of commercial vehicle loans to finance the purchase of a new or used vehicle. Depending on your business needs, you can opt for a new or a used Commercial Vehicle Loan, each having their own pros and cons.
New Commercial Vehicle Loan
A new Commercial Vehicle Loan is designed for businesses looking to purchase brand-new vehicles. These loans are typically offered with:
- Competitive Interest Rates: Since new vehicles have a higher resale value, lenders often provide competitive interest rates.
- Longer Repayment Terms: With options like flexible and longer repayment tenures you can spread your loan repayments over a longer period, making monthly instalments more manageable.
- Warranty Coverage: New vehicles usually come with manufacturer warranties, reducing maintenance costs during the initial years.
- Latest Features and Technology: Investing in new vehicles means you get the latest advancements in safety, fuel efficiency, and technology, which can enhance your business operations.
Used Commercial Vehicle Loan
A Commercial Vehicle Loan for pre-owned vehicles is ideal for businesses seeking to optimize expenses. These loans are offered with:
- Lower Purchase Price: Used vehicles are generally more affordable than new ones, reducing the overall loan amount.
- Flexible Loan Terms: Lenders often provide flexible terms to accommodate the varying conditions and ages of used vehicles.
- Reduced Depreciation: Most used vehicles have already undergone significant depreciation, so their value remains more stable over time.
Also Read: Common Mistakes to Avoid When Applying for a Commercial Vehicle Loan
Benefits of Financing vs Outright Purchase
When deciding whether to finance a commercial vehicle or purchase it outright, it's important to consider the benefits of each option. Financing can offer several advantages over making an outright purchase, especially if your business is looking to manage cash flow and conserve working capital.
Financing:
- Better Vehicle Options: With financing, you can easily acquire the latest vehicles with the most modern features without budget constraints.
- Preserve Cash Flow: Financing with a new or used Commercial Vehicle Loan allows you to spread the cost of the vehicle over time, preserving your cash flow for other essential business expenses.
- Build Business Credit: Successfully managing a loan for commercial vehicles can help build your business credit, making it easier to avail of financing for future needs.
- Manageable Repayments: Lenders often offer flexible and long repayment tenure to pay off a Commercial Vehicle Loan. This helps spread the cost of purchase into Equated Monthly Installments (EMIs).
Outright Purchase:
- Ownership from First Day: An outright purchase can give you complete ownership of the commercial vehicle although it calls for 100% upfront payment using working capital.
- Easier Resale/Upgrade: You can sell or upgrade the vehicle without any lender restriction or prepayment charges.
- No Interest Payments: While you can avoid the cost of borrowing by purchasing a commercial vehicle outright, it can take a toll on your working capital reserves due to the upfront payments involved.
How to Choose the Right Loan for Your Business Needs
Selecting the right Commercial Vehicle Loan for your business involves careful consideration of several factors. Here are some key points to help you make an informed decision:
Know your Business Needs: Start by determining the type and number of vehicles your business needs along with their intended use. This can help you decide whether a new or used commercial vehicle loan is more suitable.
Evaluate your Monthly Budget: Consider your business finances including cash flow. Estimate how much you can afford for monthly payments without straining your business finances. This is where a Commercial Vehicle Loan EMI calculator can come in handy.
Choose the Right Lender: With various NBFCs and banks offering a loan for commercial vehicle purchasing, it is important to compare features and benefits and choose the best lender. Consider factors like loan amount, interest rates, processing fees, repayment tenure, foreclosure charges etc.
What Vehicles Can a Commercial Vehicle Loan Finance?
The following are the types of vehicles a Commercial Vehicle Loan can finance:
- Light Commercial Vehicles (LCVs): This includes smaller vehicles like pickup trucks, small vans and other light-duty vehicles which are majorly used for transporting goods or passengers over short distances.
- Medium and Heavy Commercial Vehicles (MHCVs): This involves larger vehicles like heavy-duty trucks and buses, which are used for long-distance transportation of goods and passengers.
- Passenger Carriers: These vehicles are designed to transport people, including buses, minibuses and large vans. They are commonly used by public transport services, schools and tour operators.
- Goods Carriers: These vehicles are specifically designed for transporting goods like trucks, tippers and trailers. They are essential for logistic companies, construction businesses and other industries that require the movement of heavy or bulk items.
To Conclude
A Commercial Vehicle Loan is a vital financial aid for the purchase of commercial vehicles. By taking a loan instead of purchasing a vehicle with working capital, you can consider better vehicle options, avoid upfront costs and repay conveniently with flexible repayment tenure. Commercial vehicle loans can finance vehicles like light commercial vehicles (LCVs), medium and heavy commercial vehicles (MHCVs), passenger carriers and goods carriers.
Poonawalla Fincorp offers Commercial Vehicle Loan at an attractive interest rate starting at 10%* p.a. With a high loan to value ratio and flexible repayment tenure of up to 60 months, you can get up to ₹1 Crore for purchase of vehicles for your business needs. Apply with minimal documents and get funds to realize your business goals with a hassle-free Commercial Vehicle Loan.
Frequently Asked Questions
What are the benefits of financing over outright purchase of Commercial Vehicles?
There are several benefits of financing your purchase with a new Commercial Vehicle Loan. In addition to preservation of working capital, you can also purchase the latest models of commercial vehicles at affordable interest rates.
Can I purchase the latest commercial vehicles with a loan?
Yes. You can opt for a new Commercial Vehicle Loan to fund the purchase of new commercial vehicles for your business.
How do I choose between a new and used Commercial Vehicle Loan?
There are certain pros and cons of a new and used Commercial Vehicle Loan. Financing a new vehicle offers lower interest rates and higher loan amounts while you can get the latest vehicles. On the other hand, a used Commercial Vehicle Loan is usually offered at slightly higher rates.
What are the minimum eligibility criteria for a Commercial Vehicle Loan?
You can apply for a Commercial Vehicle Loan if you are an Indian between 18 to 65 years and a self-employed non-professional*.