Business car loans: how to finance a company car or van

Your limited company can finance a car or van with hire purchase, a finance lease, contract hire or a business loan. Hire purchase is usually the cheapest way to buy one new vehicle that you'll keep. A business car loan is better suited to used vehicles, deposits and several purchases at once. It's important to note that tax and VAT work differently for cars and vans.

We compare the main ways to finance a business car or van and the suitability of certain options for different vehicle needs.

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Can a limited company finance a car or van?

Yes. Your company can buy or rent a car or van in its own name through a dealer, a bank, a broker or an online lender. The real choice is whether the company wants to own the vehicle, because that changes the cost and the tax.

Dealers often arrange hire purchase or contract hire through a finance house. Banks and specialist funders offer asset finance secured on the vehicle. Online lenders, including iwoca, offer business loans you can spend on a vehicle. If the vehicle is a van, our guide to van finance covers the van-specific options.

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Ways to finance a company car or van compared

There are five main routes to financing a business car or van: hire purchase, a finance lease, contract hire, a business loan or cash. Only hire purchase, a loan and cash end with your company owning the vehicle.

Here's a comparison table to give you a good idea about the different options, and the key things to know, like mileage and tax implications:

Sources: HMRC CA23310 (HP buyers claim allowances), gov.uk what you can claim on (leased items don't qualify), VAT Notice 700/64. Checked 12 October 2026. Vans follow different VAT rules — see the tax section below.

HP and finance leases are both forms of vehicle asset finance: the funder buys the vehicle and your company pays for it over time. The difference is ownership. With HP your company owns the vehicle once the last payment (and any option-to-purchase fee) is made. With a finance lease the funder keeps it, and at the end you usually sell it on the funder's behalf for a share of the proceeds or keep renting it. Our guide to hire purchase vs a finance lease goes deeper into this.

Contract hire is long-term rental. You never own the car, and mileage or damage over the agreed limits is charged when you hand it back. If that suits you, read our guide to leasing a car through your company.

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How much deposit do you need, and can you finance a used vehicle?

Lenders set their own deposit rules, and some will fund the full price. Lloyds Bank, for example, says it funds up to 100% of the price on some products and 90% on others. A bigger deposit lowers both the monthly payment and the total interest.

A balloon payment works the other way. It cuts the monthly cost by leaving a lump sum to pay at the end, so you pay interest on more of the balance for longer.

Used vehicles can usually be financed with HP if they come from a dealer. A private sale is harder, because the funder has to buy the vehicle and check its history. That's one of the cases where a business loan can be simpler: the money goes to your company and you pay the seller.

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What does a business car loan cost?

Business vehicle finance is priced deal by deal, so lenders rarely publish specific rates. Capitalise illustrates a £25,000 car with a 10% deposit at 11% APR: £1,363 interest over one year, rising to £6,852 over five.

Lloyds Bank says its "pricing is tailored on the asset you want to buy or lease". Your rate depends on your company's credit history, how long it's been trading, the size of the deposit, the vehicle and the term.

Asset-backed finance is usually cheaper than unsecured borrowing, because the funder can take the vehicle back.

Capitalise's illustration: £25,000 vehicle, £2,500 deposit, £22,500 financed at 11% APR (checked 12 October 2026).

Source: Capitalise business car finance calculator. On the same car over 3 years, Capitalise puts the monthly payment at about £695 at 7% APR and about £825 at 19% APR.

A longer term lowers the monthly payment but costs more overall. Compare offers on the total amount repaid, any fees and any balloon, not just the monthly figure. To test your own numbers for a loan, try our business loan calculator.

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When a business loan is more suitable than hire purchase

HP is usually cheaper for one new vehicle you'll keep, because the funder can take the vehicle back if payments stop. An unsecured business loan earns its higher cost when HP doesn't fit: a used or private-sale vehicle, the deposit, or several purchases at once.

Here's the trade-off on the same £25,000 car, using Capitalise's 11% APR illustration and our representative rate of 3.33% per 30 days over 12 months.

The loan figures above are at our representative rate of 3.33% per 30 days, so they're illustrative. Your own price depends on your company, and our business loan calculator shows what you'd repay.

A Flexi-Loan can make sense when:

• the vehicle is used, from a private seller, or something an HP funder won't take on
• you'd rather keep cash for the deposit and pay it off over a few months
• you're buying several vehicles, or a vehicle plus fit-out, signage or tools, and want one facility
• you want the company to own the vehicle from day one, with no mileage limits or condition charges
• you might clear it early — you can repay at any time with no early repayment fee

It's probably not the right fit for you when you're buying one new car to keep for years and an HP deal is available. HP will usually cost less.

You can borrow from £1,000 to £1m over up to 5 years. You'll get a decision within 24 hours, but it might be longer depending on the complexity of the request. We don't take the vehicle as security. Instead, at least one director gives a personal guarantee, which means they can be asked to repay if the company can't. Flexi-Loans are for UK limited companies.

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Tax on a company car or van

In business vehicle finance, tax often matters more than the interest rate. Cars and vans are treated differently for VAT, capital allowances and benefit in kind, and so are buying and leasing.

Here's a quick-glance summary:

Sources: VAT Notice 700/64, capital allowances on business cars, annual investment allowance, HMRC BIM47714, company van benefit. Checked 12 October 2026. Tax rules change, so check the details with your accountant before you commit.

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Can your company reclaim VAT on a car or van?

You usually can't reclaim VAT on buying a car unless it's used only for business and isn't available for private use. On a leased car you can usually reclaim 50% of the VAT. Vans are reclaimed under the normal VAT rules.

That 50% figure is what people mean by "the 50% rule" for car finance. HMRC blocks half the VAT on car lease rentals to cover private use. A pool car that's kept at your premises and not allocated to anyone can qualify for full recovery on purchase.

Most vans aren't cars for VAT, because they're built to carry goods rather than passengers. You reclaim the VAT on buying or leasing one like any other business cost, adjusting for any private use. Source: VAT Notice 700/64, last updated 19 December 2024.

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What capital allowances can your company claim?

A new, unused zero-emission car gets a 100% first-year allowance on spending up to 31 March 2027, so your company can deduct the full cost from that year's profits. Other cars get 14% or 6% a year depending on CO2. Vans qualify for the annual investment allowance.

The main rate of 14% (18% before April 2026) applies to cars with CO2 of 50g/km or less, and to second-hand electric cars. Cars above 50g/km get the special rate of 6%. Cars can't use the annual investment allowance or full expensing. A van can usually be written off in year one through the annual investment allowance, up to £1 million.

The allowances work the same way whether you buy with cash, a loan or HP. With HP, HMRC treats your company as the owner from the start. Sources: gov.uk business cars, first-year allowance extension.

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What benefit-in-kind tax applies?

If a director or employee can use the car privately, they pay benefit-in-kind tax on a percentage of its list price. Electric cars sit at 4% in 2026–27 and 5% in 2027–28, so they're often the cheapest company car to run.

Petrol and diesel cars sit much higher on the scale, which is why buying a car through the company isn't always better for a director than buying it personally. A van with private use is taxed on a flat standard value of £4,170, or £0 for a zero-emission van. Sources: gov.uk appropriate percentages, company van benefit.

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Is the interest tax-deductible?

Usually, yes. For a limited company, interest on borrowing used for the trade counts as a trading cost and is deducted from trading profits for Corporation Tax.

That applies to interest on a business loan or HP used to buy a business vehicle. Source: HMRC CFM32020.

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How to get a business car loan

Decide whether you want to own the vehicle, then compare the total cost of each offer, not just the monthly payment. Most lenders want company details, recent accounts or bank statements, director details and the vehicle's details.

1. Choose own or rent. HP, a loan or cash if you'll keep it; a lease or contract hire if you'll swap it.
2. Get the vehicle details. Price, age, CO2, and whether it's a car or a van for VAT.
3. Check what you can afford. Work out a monthly figure your cash flow can carry, including insurance and running costs.
4. Compare offers. Ask for the APR, fees, total amount repaid, any balloon and any mileage limits.
5. Apply. Have your company's accounts or bank statements, director details and the vehicle details ready.

Each lender sets its own rules on turnover and trading history. Lloyds Bank, for example, asks for turnover of more than £100,000 a year. With iwoca, you'll get a decision within 24 hours.

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Can you get vehicle finance with bad credit?

Often, yes, but expect a higher rate, a bigger deposit or a director's personal guarantee. Asset-backed finance can be easier to get, because the vehicle itself reduces the funder's risk.

If you have time before you buy, it's worth working to build your business credit score first.

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Does vehicle finance affect your company's credit score?

It can. Lenders usually run a credit check when you apply, and the agreement then shows on your company's credit file.

Paying on time helps your company's credit record, while missed payments count against it.

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What happens if your company can't keep up repayments?

With HP or a lease, the funder owns the vehicle until you've paid, so it can take the vehicle back. With an unsecured loan backed by a personal guarantee, the director who signed can be asked to repay.

Ending an HP or lease agreement early can also mean termination charges or a shortfall if the vehicle sells for less than you owe. If repayments are getting harder, talk to your lender before a payment is missed.

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Should your company pay cash instead?

Paying cash avoids interest but ties up money you might need for wages, stock or a VAT bill. The capital allowances are the same whether you pay cash or use HP.

If your company has spare cash that doesn't need to be used elsewhere, paying outright is the cheapest option. But if cash is tight, spreading the cost of the vehicle keeps a buffer for the months when customers pay late, for seasonal dips, or for unexpected costs.