Van finance for UK businesses
Van finance, properly explained
For limited companies, sole traders, partnerships and newer businesses buying new or used vans anywhere in the UK. We explain the three main structures, what each means for ownership and VAT, and then help you find a lender that fits.
- An enquiry, not an application
- New and used vans
- Ownership and VAT explained
Most van finance comes down to three structures. Hire purchase spreads the cost of buying the van, and you own it after the last payment. A finance lease lets you use the van for a set period without ever owning it. Lease purchase is hire purchase with a lump sum deferred to the end, which brings the monthly payment down.
None of them is the right answer for everyone. The better fit depends on whether you want to own the van, whether you are VAT registered, how long you plan to keep it, how many miles it will cover and how steady your cash flow is. We are a broker, not a lender, so our job is to explain the trade offs and then present your case to lenders whose criteria suit it.
Side by side
Hire purchase, finance lease and lease purchase
The general position for UK businesses buying vans. Your accountant confirms how tax and VAT apply to you.
| Hire purchase | Finance lease | Lease purchase | |
|---|---|---|---|
| Who owns the van during the agreement | The lender. You have use of it and become the owner once every payment and any option to purchase fee is paid. | The lender, throughout. You rent the van for the agreed period. | The lender, until the final balloon payment and any option fee are paid. It is a form of hire purchase. |
| Ownership at the end | Title passes to your business after the final payment. | Title does not normally pass to you. Typical options are a secondary rental period, or selling the van to a third party as the lender's agent and receiving an agreed share of the proceeds. | Title passes once the balloon is paid. You can usually pay it in cash, refinance it, or sell the van and settle it. |
| VAT on the van | VAT on the purchase price is normally payable at the start. A VAT registered business can usually reclaim it on its VAT return, subject to the normal rules on business use. | VAT is charged on each rental rather than upfront. A VAT registered business can usually reclaim it on its rentals, subject to business use. | Treated like hire purchase: VAT on the purchase price is normally payable upfront and may be reclaimable. |
| Tax relief (general position) | The business is usually treated as owner for capital allowances, and interest is generally an allowable expense. Your accountant confirms how this applies to you. | Rentals are often deductible in line with your accounts, but the accounting standard you report under can change the treatment. Confirm with your accountant. | Usually treated as for hire purchase. The balloon does not change the general tax treatment, but confirm with your accountant. |
| Balloon payment | Not usually. The cost is spread evenly, so monthly payments are higher than a balloon structure. | Can include a final residual rental, which reduces monthly rentals but leaves a sum due at the end. | Yes. A lump sum is deferred to the end, which reduces monthly payments. |
| Often suited to | Businesses that want to own the van outright and keep it for most of its working life. | VAT registered businesses that replace vans on a cycle and do not need to own them. | Businesses that want ownership but need lower monthly payments, and accept a lump sum later. |
This page is general information, not tax, accounting or legal advice. Tax and VAT treatment depends on your circumstances and can change. Speak to your accountant before choosing a structure. Finance is subject to status and lender approval. Some vehicles, including certain double cab pickups, have their own VAT and tax rules.
Four questions
Which structure is worth looking at first?
Answer four questions to see a shortlist with the reasons behind it. No rates, no quotes and no personal details.
Who we help
We work with businesses across the UK that need one van or a small fleet, from trades and couriers to service businesses that run vans alongside other work. Coverage is national; we do not need you to be local to us.
- Limited companies and LLPs replacing or adding vans
- Sole traders and partnerships, where some agreements may be regulated
- Newer businesses with a limited trading history
- Buyers of new vans from dealers and used vans from dealers or auctions
What lenders look at
Lenders want to understand the business, the people behind it and the van itself. Clear information at the start usually saves time later.
- How long you have been trading and in what structure
- Business and personal credit history of the directors, partners or owner
- Recent bank statements and, where available, accounts
- The van: make, model, age, mileage and the supplier
- Any deposit or part exchange you are putting in
What you will need
Exact requirements vary by lender and by deal size. As a starting point, have these to hand.
- Business details and how long you have traded
- Details of the van and supplier, or a quote or order form
- Recent business bank statements
- Photo ID and proof of address for the people signing
How a typical agreement works
Terms are commonly a few years, agreed upfront, with fixed payments. Some lenders ask for a deposit, others do not, depending on the case. We do not publish rates because they depend on your circumstances and the lender.
Common mistakes
Choosing on monthly payment alone, ignoring how a balloon will be paid, and agreeing a term that outlasts the van's useful life are the problems we see most often.
Sole traders and partnerships
If you are a sole trader, a partnership of two or three partners, or an unincorporated body, some finance agreements may be regulated under the Consumer Credit Act 1974. A regulated agreement carries extra protections and different paperwork. Whether yours is regulated depends on the amount borrowed, the purpose and any exemptions that apply. We will tell you before you proceed, and the lender will confirm it in the agreement.
Questions we are asked
What is van finance?
Van finance is any agreement that lets your business use or buy a van while spreading the cost over time. The main business options are hire purchase, finance lease and lease purchase. Each treats ownership, VAT and the end of the agreement differently.
Should I choose hire purchase or a finance lease for a van?
Hire purchase usually suits businesses that want to own the van and keep it. A finance lease often suits VAT registered businesses that replace vans regularly and do not need ownership. Your accountant should confirm the tax position before you decide.
Can I reclaim VAT on a financed van?
VAT on vans used for business is generally recoverable by VAT registered businesses, unlike most cars. On hire purchase VAT is normally paid upfront on the purchase price; on a finance lease it is charged on each rental. The amount you can reclaim depends on business use, so check with your accountant.
Do I need a deposit?
Not always. Some lenders will consider agreements without a deposit, and others will ask for one depending on trading history, credit profile and the van. A deposit or part exchange can lower the amount borrowed.
Can I finance a used van?
Yes. Lenders finance used vans from dealers and, with some lenders, from auctions or private sellers. Most set limits on the age and mileage the van can reach by the end of the agreement.
Can a new business get van finance?
It is possible, but there are fewer lenders and they look harder at the people involved, any deposit and the plan for the van. A limited trading history does not rule you out.
Will you check my credit?
Not at the first conversation. When you choose to apply, the lender will carry out credit checks on the business and usually on directors, partners or the owner. We explain what checks are involved before anything is submitted.
Are van finance agreements regulated?
Agreements with limited companies and LLPs are generally unregulated. Some agreements with sole traders, smaller partnerships and unincorporated bodies may be regulated under the Consumer Credit Act, depending on the amount and any exemptions.
What is a balloon payment?
A balloon is a lump sum deferred to the end of the agreement. It lowers the monthly payment but must be paid, refinanced or settled from the van's sale at the end. It is common on lease purchase.
Do you charge a fee?
Sorbus Finance is a broker and is usually paid commission by the lender. Where a fee applies, we tell you before you proceed. Our commission disclosure explains how we are paid.
Do you cover the whole of the UK?
Yes. We arrange van finance for businesses across England, Scotland, Wales and Northern Ireland, subject to lender criteria.
Can I settle the agreement early?
Most agreements can be settled early. The settlement figure depends on the lender and the terms. Ask for this to be explained before you sign.
Van finance by situation
Your business circumstances
Compare finance structures
Choose your van
VAT and releasing capital
Guides and dealer referrals
This page is general information, not tax, accounting or legal advice. Tax and VAT treatment depends on your circumstances and can change. Speak to your accountant before choosing a structure. Finance is subject to status and lender approval.
Who you are dealing with
A broker, regulated, and clear about it
Sorbus Finance Limited is an appointed representative of Moorgate Finance Limited, which is authorised and regulated by the Financial Conduct Authority (firm reference number 662419). We are a credit broker, not a lender.
We work with a panel of lenders that includes high street banks, specialist asset finance lenders and manufacturer linked finance houses. Each has its own criteria, so part of our work is matching your business to the lenders likely to say yes, rather than applying everywhere.
Not all commercial finance activities or agreements are regulated by the Financial Conduct Authority. Regulatory protections depend on the activity, agreement and customer circumstances.