How to Find The Best Commercial Vehicle Financing Rates

Published October 1, 2020 by WC Team

How To Find The Best Commercial Vehicle Financing Rates?

Commercial vehicle financing is generally provided to the business companies, self-employed operators to purchase the vehicle for commercial use. The major advantage of financing your commercial vehicle is that you can save your company's money, while the loan will pay the amount for the vehicle. 

Nowadays, banks have relaxed and understandable terms and conditions to easily assist borrowers in availing of the loans for their commercial vehicles. If you can meet the eligibility requirements, you are qualified to get lower commercial vehicle financing rates. The commercial banks also provide loans taking the commercial vehicle as a token of security.  

Types Of Commercial Vehicle Loans

There are three different types of commercial vehicles that are eligible for loans. Moreover, the financing rates also depend on the type of vehicle you own.

New Commercial Vehicle Loan

With the new commercial vehicle, you can acquire the total worth of your vehicle as a loan. If you require additional funding to construct your vehicle's body, some banks might even offer you this facility.

Used Commercial Vehicle Loan

As the name suggests, used commercial vehicles hold less value, and you are provided with 90% of your vehicle's total value. Only those used commercial vehicles that are not more than 15 years old are eligible for the loan, or have less than 500,000 miles.

Commercial Vehicle Refinancing:

If you already have an existing loan with the loan provider, you can choose commercial vehicle refinancing. You can even reduce your EMIs due to the lower finance rates when you opt for refinancing.  

Rates And Terms For Commercial Vehicle Financing

Most of the commercial vehicle financing rates depend on the borrower’s financial stability. The loan amount is that they can repay the interest rates. In most cases, the lender would like you to afford the full value of your vehicle.

The borrowers or the business operators with legitimate proof of monetary stability and a powerful credit score are eligible for the best and lowest commercial vehicle financing rates. The repayment term usually ranges from one year to five years. Depending on the loan's total length and your ability to repay, the loan installments will either be monthly or weekly.

The lowest credit score would impact your financing rates. In this case, there will be higher commercial vehicle financing rates. When dealing with a lower credit score, you would need to make a down payment as a guarantee. And in most situations, it is expected to be 10% of your vehicle's total cost.  

Factors On Which The Commercial Vehicle Financing Rates Depend

On Credit Score

Borrowers with higher credit scores at 760 are eligible for a lower financing rate of 3%. They are the prime candidates for the loan. Credit scores, 580 or below, show the discontinuous financial history, including the possibility of bankruptcy or delay in monthly payments.  The commercial vehicle financing rates may rise to 20% with a lower credit score.

The lender determines whether to extend the loan to the applicant or not based on credit score and other factors, including the ability to repay the amount, liquid capital, and the car's cost. 

On Term Length

The standard term for a commercial vehicle is for 63 months. Many credit unions and banks provide a repayment period of 24-72 months. The shorter the length of the term results in lowering the financing rates.  The average financing rate for 36 months is 4.21%, while for 72 months, it becomes 4.45%.

On Lenders

The choice of the institution plays a crucial role in determining the financing rates for your commercial vehicle. With the right institution, you will get lower rates on your commercial vehicle.  

Let's take a look at a couple of institutions to help you make the right choice:

Credit Unions and Banks

Credit unions generally provide lower interest rates and versatile repayment terms. The only drawback is that they provide loans exclusively to their members, location, and profession specific.

On the other hand, the banks might offer commercial vehicle financing rates as low as 3% and as high as 25%.  That will depend on the credibility of the applicant and the credit score. They do not provide commercial vehicle loans to the applicant with a lower credit score of 600 or below. 

Dealerships

Getting commercial vehicle finance from big dealers is gaining recognition among most commercial vehicle buyers and owners. The dealers attempt to persuade the borrowers to purchase the new commercial vehicle from their lot instead of buying a second-hand commercial vehicle from another vendor. 

The dealers also try to compete with other credit unions and banks by providing the APRs as low to 0.9%. However, only the applicant with an exceptional credit score is eligible for lower financing rates.

Commercial Vehicle Financing Rates For Used And New Vehicles.

Used commercial vehicles are less reliable as compared to the new one in terms of age and model. Thus, they tend to have higher financing rates. Older and used commercial vehicles typically carry higher APRs. A large bank may offer 2.99% of financing rates on the new vehicle, while it rises to 5.99% for the used vehicle. The difference between the two is easily visible.

The Process Of Repayment Of The Loan

The repayment procedure for commercial vehicles is generally through EMIs. The EMIs are calculated by your lender, including the principal and your commercial vehicle's financing rates.   

Commercial vehicle financing rates are always mentioned in your loan agreement. However, if you want to close your loans before the completion of the term, you might have to pay 2% of the total balance of your loan amount.

Final Thoughts

Searching for the right commercial vehicle financing institution must be challenging and time-consuming. However, it is worth the effort to discover the right lender who can provide you with the best and lowest commercial vehicle financing rates according to your budget and requirements. 

The commercial vehicle financing rates and the number of loans is finalized after reviewing the applicant's credit and personal history. You will find the lender of your choice, albeit you have got a poor credit score if you look around to find the best deals and financing rates on your commercial vehicle.

Are you a business owner? Apply for financing. Start Now.

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