How Commercial Fleet Vehicle Financing Can Work For You

If you have a business that needs vehicles to keep your employees moving, delivering goods, or transporting items, you’ve probably considered a fleet of commercial vehicles. Construction crews, HVAC workers, landscapers, equipment dealers, solar panel installers, and general contractors all need specific vehicles to do their jobs. Whether you need to move goods or allow your employees to travel for work, a fleet of vehicles can be a major part of your business. Sure, buying an automobile is an expensive proposition, but an entire fleet of cars, box trucks, or commercial trucks is another story.

Depending on the size and type of vehicle, you may need to ensure you have the correct license and registration, which may incur additional charges. Fleet management is also a consideration, which includes vehicle maintenance, driver management, safety and legal compliance, and operational management. You may need special software or equipment, like GPS trackers, to ensure you have the best possible fleet management.

Fortunately, just like with personal cars, there is commercial fleet financing (CFF).

Equipment financing is usually straightforward for small businesses that need transportation equipment, commercial equipment, or construction equipment, as long as your business is in good standing. But there are many considerations that go into deciding how to finance your fleet, and it’s worth doing your research.

Depending on your industry and your specific business needs, you may need a variety of vehicles, a fleet of the same type of vehicles, or just one or two vehicles to provide your services. You will also need to consider accounting issues such as cash flow, your company’s credit rating, and your overall likelihood of getting approved for credit.

Read on to find out how you can get financing for a commercial vehicle fleet.

How to finance a car fleet?

For business owners who need a fleet, there are two ways to finance it: purchase or lease. Buying means you pay cash for the fleet (usually with a loan) and own the equipment when you’ve paid it off. Leasing means that the vehicle or fleet serves as collateral and you have the option of buying it outright later.

The decision to rent or buy depends on several factors. Leasing requires less upfront capital and your monthly payments will likely be lower. They will also be matched to the market value of the vehicle. Leasing also offers more flexible terms than buying and can give you more flexibility with your cash flow. You also have more control over standardization and will have less age-related maintenance costs over time because you are not responsible for maintenance.

Buying a fleet can mean you have to deal with selling or disposing of the fleet of vehicles when you’re done. You’ll also need to pay more attention to budgeting and forecasting to afford higher payments and high upfront cost. However, buying a fleet can help you establish equity and give you more options when it comes to vehicle variety.

Buy a commercial fleet

Unless your small business has plenty of cash, buying means getting a loan, just like you would a personal vehicle. But there are several pros and cons to consider. A commercial trucking loan, for example, may not require cash collateral, as the truck itself is the collateral. There may also be a longer repayment period than smaller loans, which may result in a lower overall monthly payment, which means it takes less of your monthly cash flow. Equipment purchases, such as commercial vehicle fleets, are also a tax deduction for your business, which can help you save on taxes.

However, this type of loan requires a large down payment, usually between 5 and 25% depending on your credit scores. And since there will be considerable depreciation of the vehicle or fleet over time, you may not gain much by reselling them.

As with personal vehicles, there are also financing options for used fleets or individual commercial vehicles. You have a good chance of finding a like-new fleet from former fleet owners who need to sell their gear.

In addition to getting a loan, you may be able to find a commercial line of credit from a car manufacturer or your bank so you can use it to pay for new or updated vehicles and equipment over time. time.

Rent a commercial fleet

Because buying a fleet can mean more upfront capital, many small businesses choose to lease a commercial fleet instead. It also frees up more capital that you can use to grow your business in other ways. You can also deduct a lease from your taxes by deducting lease payments from your income statement for an operating lease or by claiming depreciation for a capital lease.

For rental, several options are available to you:

  • Operational leasing, which allows you to operate the vehicle or fleet without owning it
  • Leasing, which allows you to use an asset on a rental basis, but appears as a property in the accounting
  • Sale and leaseback, where the owner would sell the vehicle or fleet and then pay the new owner to lease it
  • Terminal Rental Adjustment Clause (TRAC), which allows you to purchase the vehicle or fleet directly at the end of the lease
  • Fair market value lease, which allows you to upgrade to newer versions of equipment (usually for a heavy truck or tractor-trailer)

Each of these leasing options has its own advantages and disadvantages, and the right lender can help you determine the financing program that’s right for you and your business needs.

Commercial Truck Fleet Types

There are different types of commercial truck fleets. Many vehicle fleets provide a service themselves, such as:

  • Utility fleets, including water, electricity, and Internet Service Providers (ISPs)
  • Delivery fleets for local deliveries from transit centers, such as florists, food delivery or Amazon and UPS
  • Specialized vehicles like tow trucks, garbage trucks, street sweepers and fire engines

There are also fleets of vehicles whose service is to a customer, such as:

  • Fleets of rental vehicles
  • Passenger vans
  • The buses
  • Coaches

Commercial Trailer Fleet Types

A commercial trailer must be pulled by a motor vehicle and is intended for transporting larger and longer goods. Long-haul delivery trailers, shipping companies and large equipment companies will use a fleet of commercial trailers. These can be box trucks or semi-trailers.

These fleets require special licenses to operate and be registered from state to state. You will want to check with your state Department of Motor Vehicles (DMV) to make sure the operating requirements are covered.

How to Apply for Commercial Fleet Financing

Applying for commercial fleet financing is similar to applying for other business financing or personal financing.

To apply for commercial vehicle fleet financing, follow these steps:

  • Determine which vehicle(s) you want to buy or lease and who you want to buy from
  • Determine which lender is right for you and what offers you qualify for (what Nav can help with)
  • Gather the necessary information and documents
  • Collect down payment
  • Get insurance

You can apply to many lenders and financing programs online, or in person if you choose a more traditional bank.

Qualification for commercial vehicle fleet financing

In order to qualify for commercial fleet financing, you will need to meet the specific requirements of your lender. You can expect any lender to consider:

  • Your personal credit score
  • Your business credit score
  • credit history
  • How long have you been in business
  • Annual revenue
  • Industry experience
  • Commercial Driver’s License (CDL), which may depend on your lender

Generally, you should expect to pay a deposit of 5-25%, again depending on qualifications. Higher credit scores will also qualify you for better interest rates.
Nav can help you find the right financing for your commercial vehicle fleet by helping you access and grow your business credit. We use your specific data points, like years in business, business and personal credit score, and annual income, to find financing from reputable lenders that you are most likely to qualify for. Open a Nav account today if you haven’t already and start finding the right financing for your commercial fleet.

This article was originally written on April 14, 2022.

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