A business buying a vehicle has four shapes to choose between and they are not interchangeable. A loan leaves the vehicle on the balance sheet from day one. Hire purchase treats the company as buying it and usually lets the VAT be recovered on the purchase price at the outset. Contract hire is rental, with the VAT on the rentals instead. A contract purchase sits between them. Which one is right is an accounting question as much as a credit one, and the monthly figure is the last thing to compare.
Vehicle finance for business is often not regulated credit at all
Finance taken by a limited company, or by a sole trader wholly or predominantly for business use, can fall outside regulated consumer credit. The rights a consumer would assume are there, the fourteen-day withdrawal, the early settlement rebate and voluntary termination, attach to regulated agreements. On an unregulated business facility you get whatever the contract says instead, so the early settlement and termination clauses are the ones to read before signing.
Hire purchase for business, and where the VAT lands
On hire purchase the company is treated as buying the vehicle, so it can usually recover the VAT on the purchase price at the outset, subject to its own VAT position. On a lease or contract hire the VAT is charged on the rentals as they fall due. That single difference often outweighs the rate, and it is a question for the company's accountant rather than for the dealer's finance desk.
Business PCP and pcp for business: the balloon is a company risk
A personal contract purchase written to a company works the same way it does for a consumer: lower instalments, an optional final payment sized on the forecast value, and a mileage limit. For a trade vehicle the mileage limit is the part that bites, because commercial use rarely stays inside a consumer-shaped allowance, and the excess charges land on the company at the end of the term.
Car finance for limited company applications is underwritten on the director
A company with no filed accounts has no credit history of its own, so the funder underwrites the director and asks for a personal guarantee. That document sits outside the company's limited liability and survives the company being dissolved, which makes it the most important thing in the pack. An established company is usually asked for filed accounts or management figures instead.
Questions people ask about business vehicle loans
Is business vehicle finance uk lenders write regulated like consumer finance?
Not always. An agreement with a limited company, or with a sole trader wholly for business use, can be unregulated, and the Consumer Credit Act rights do not attach. Ask which it is in writing before you sign.
What does car finance for ltd company underwriting look for?
Filed accounts or management figures where they exist, the trading history, and the director's own credit file. Where the company is new, the director's file and a personal guarantee carry the decision.
Is ltd company car finance cheaper than a personal agreement?
Sometimes, because the VAT and tax treatment can be better, and sometimes not, because an unregulated business facility carries fewer statutory protections and can price them in. Compare the total cost after VAT recovery with your accountant.
Can a business take a personal loan for a vehicle instead?
A director can, but it is then their debt and their asset, not the company's, and the tax treatment changes with it. If the vehicle is a company asset, the facility should normally be in the company's name.