5 Best Business Car Loan as a Business or Sole Trader

Car Loan

It is always an exciting time when as a business you are buying a car. If you are self-employed or thinking of starting your own business, it is just like you are on a path to pursue your independent career. 

But not everything is as simple as we like it to be. There are a few types of business car loans- good loans, finance leases and hire purchases. Buying a car for your business includes certain taxes, employee advantages, and insurance. 

In this article, we will discuss various types of car financing, and choosing the right type of finance can help you reclaim the feeling of first car freedom.

What is a business car loan?

A business car loan lets you purchase a vehicle for your business with money given to you in advance. Like any other loan, you have to repay the borrowed money to the financing company regularly- usually monthly over a fixed period. The time depends on the term of the loan. 

Among the three types of car financing, we will discuss a good loan (also referred to as a chattel mortgage) as it is the most popular business car loan.

How does car financing work?

Financing a car may seem a little overwhelming especially if you are buying for the first time. But understanding car financing doesn’t have to be a big deal. 

Once you have decided to buy a car for your business, you have two types of payment options: you can pay the full amount of the car or finance the car over time with a credit or lease.

There are 3major factors to consider when you opt for buying a vehicle with a loan. The loan amount (it is the total amount you have borrowed from the financing company); the annual percentage rate (this is the percentage rate you pay on your loan, APR), and the loan term (this is the total amount of time you have taken to repay the loan). 

Used cars have higher rates than new ones. The newer the car, the interest rate will be lower. Another thing that affects the rate is the term. Actually, the shorter the loan is, the lower the rate. But you should keep in mind that if the term is shorter then the payments will be higher.

Types of business car loans

There are several types of car loans available which make it difficult to choose the best one for you. Here, we will discuss various types of business car finance:

Hire purchase: 

One of the most popular methods of purchasing a business car is to use a hire purchase agreement. Hire purchase is a type of car financing that allows you to own a car at the end of your financial plan, after securing the car with low deposit ad monthly payments.

The structure of hire purchase means that you wouldn’t own the vehicle until you would pay the full amount of the car. 

Conditional sale: 

A conditional sale is another method of financing a vehicle, just like a hire purchase. You will have to pay a deposit backed up by equal monthly repayments over the specific term of the loan. Conditional sales sometimes get confused with hire purchases. The key difference is that with a conditional sale, there is no option to purchase. You will automatically be the vehicle’s new owner after finishing your all repayments.

Personal Contract Purchase:  

This type of financing is necessarily a long-term contract. Personal contract purchase has some similarities with hire purchase as an individual have to pay a deposit for using the car and then have to repay the loan amount in monthly installment.

But the difference is that the borrower doesn’t repay the total cost of the car in equal monthly installments. Rather, they pay lower monthly payments to cover the vehicle’s depreciation and at the end of the contract pay a huge amount to own the car. This sum is known as balloon payments.

Personal loan: 

If you don’t have the available money to buy a car, you could take out a personal loan. To get a personal loan you must have a good credit score and can keep up with the repayments. With a personal loan, you can spread the cost of the car over a certain period but you will become the legal owner from the start.

Can I get car finance with bad credit?

If your credit score is around 620 and above, you can face difficulty qualifying for a loan or borrowing money for a car or a house. Your credit score is a measure of your financial responsibility and your ability to repay a debt.

If you need car finance with less-than-perfect credit, then your financing conditions may be expensive. Lenders use the credit score to calculate the likelihood you will repay your loan. If you owned poor credit then they believe the more risk they are taking on. For this, lenders charged a higher interest rate for your car financing.

 Because the car acts as collateral and of course secures the loan, the car lenders find it not so difficult to finance your car. However, if you repeatedly fail to repay your monthly installments, the lender can repossess the car.

Shopping around and comparing rates and also loan terms across different lenders may help you to find the best loan option for you that suits your budget and requirements. If you have poor credits, here are some lenders you may consider:

  • Your current bank or credit union: If you already have a relationship with a bank or credit union then it may be the best option for you.
  • Online lenders: There are some online lenders and online platforms available to loan people who have poor credit scores. They may allow you to apply for prequalification on their website, if you have prequalified then you could see the rate and the term of the loan you may qualify for.
  • Car dealerships: Dealerships have a relationship with several banks and finance companies which means they may find a lender for you in their network. 
  • Buy-here, pay here dealership: If you can’t get approved anywhere for an auto loan and you need a car then buy-here, pay here could be the last option for you. Their interest rate tends to be much higher than those offered by other banks and lenders. 

Find the right 5 businesses car financing deal for you-

There are multiple ways to finance your business car. For many traders, a personal loan will be the most straightforward choice. Local banks and dealerships offer direct loans; you can walk to the nearby branches of these. Some car financing companies can fulfill your requirements. The cost of car finance will depend on the cost of your car, the type of agreement you choose, and the amount you have deposited. The top 5 business car loan providers are:


NatWest is a retail and commercial bank that offers motor financing in the UK. NatWest Bank offers personal loans for buying vehicles. Besides they also provide asset financing through Lombard. It represents a 3.4% APR; however, they do not offer a specific APR. You can choose an exact plan that can have either a fixed rate or a variable. The loan term is from 2 to 8 years. Suppose, If you borrow £7,500 for 5 years, at 3.4% APR with a monthly installment of £135, that means you have to pay £8,155.80 in total.


In the United Kingdom, TESCO bank offers a variety of financial services including car finance. It represents 2.8% APR, however, this rate may vary. The minimum APR rate is 2.8% and the maximum rate is 27.5%. The loan term could be from 12 to 120 months, it depends on the amount of your loan. 

Credit plus: 

Credit Plus is a finance provider, that helps around 80,000 customers a year to grow their business and get the essential vehicle they might need for their business. It represents an APR of 7.8%, the loan term is from 2 to 5 years. Suppose you have borrowed £7,500 for around 48 months with a 7.8% APR and if will pay back £182.5 each month, then you will pay back a total of £8,760.


BARCLAYS offers its customers who have been with them for at least 12 months asset financing so that you can buy things such as equipment, and business vehicles to grow your business. BARCLAY starts financing from £10,000, and the loan term is 1 to 5 years. 


Mercedes-Benz is a renowned car manufacturing Company not only in the UK but also across the world. They offer their customers deals for monthly payments which means they can secure smaller payments instead of a huge lump sum. It represents an APR of 5.4%, the loan term is four years. Once all the payments are done then you can be the owner of the car but you can drive it from the get-go.


What details do I require to apply for car finance?

Ans: To apply for car finance you have to provide any ID proof such as Passport, permanent driving license, Voter ID card, etc. Apart from these you also need to provide your income details which may be your salary slip or bank history, Address history, and your bank details. 

Which bank is best for commercial vehicle finance?

Ans: NatWest offers personal loans for purchasing vehicles. NatWest is a renowned commercial bank that offers motor financing in the UK. It represents 3.4 % APR, the loan term is from 2 to 8 years. 

What is the commercial vehicle interest rate?

Ans: Commercial vehicle finance is a popular finance agreement for businesses that need finance for cars, vans, and other commercial vehicles. The rate of interest is not always fixed, it may vary from time to time. The rate of interest on commercial vehicles ranges from 12% to 26 % per year.


There are so many options available when you are considering a loan to purchase a business vehicle. As a business owner, buying a car for your business instead of leasing will be more beneficial as every business wants to minimize costs and maximize profit. This vehicle will add some profit in the long run. Although buying a business vehicle will guarantee you full ownership.

Now all the motor finances have their unique business policy. So, you need to collect all the right information regarding the loan such as what your total repayments will be, how long the term will run, and what APR. You can also ask them if there are any extra admin fees or any early exit penalties rolled up with your credit score.

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