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Commercial Auto Loans and How to Get One

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Do you have a business that requires the use of a company vehicle? Or do you need an entire fleet of vehicles? Are you short on cash? If you answered yes to any (or all) of these questions, you might need to look into a commercial auto loan.


While commercial auto financing is similar to private auto financing, there are some important differences to understand. Keep reading to learn everything you need to know about this process.

An Overview of Commercial Auto Loans


A commercial auto loan is used by businesses that need to purchase vehicles or vehicles for day-to-day functions. This includes delivering products or services to customers, transporting employees, completing jobs, and more.


Today, you can acquire a commercial auto loan from finance companies, banks, credit unions, and even alternative lenders. While the process is similar to getting a private auto loan, there is more documentation involved. When you apply, you will find the loans are available to purchase used or new vehicles, and you can use them to refinance your current loans. While you can purchase a vehicle for personal use with the commercial auto loan, it will be hard to secure and would also be a red flag if your business was audited.


Since vehicles are a depreciating asset and they require an investment, you may decide to lease instead. However, purchasing may be a good option if your business needs a long-term vehicle and wants to write off the depreciation on the company’s tax return.


When you are looking at different auto lenders, be sure to focus on the amount that the lender is willing to cover, the fees, and interest rates. It would help if you also considered the repayment term. Some lenders will cover all the costs for a new vehicle, but this may not be the case if you purchase a used vehicle. In other situations, lenders will not finance trucks or cars that are five years old or higher because they depreciate so much. The loan term, fees, and interest rates will depend on the lender and the factors that go into figuring out how much of a risk it is.

Acquiring a Commercial Truck Loan


Usually, commercial truck financing will involve some type of transportation vehicles, such as vocational trucks (i.e., work vehicles like cement and dump trucks) or transportation vehicles (i.e., semi-trucks). Sometimes, businesses like farm, waste, delivery, and construction companies require larger and more spacious vehicles to move materials. You may not have the funds needed to finance every truck, which means you may need a commercial auto loan.

Many equipment finance companies have stated that they provide loans for an individual truck, but usually, the requirement is that you purchase a minimum of three vehicles. Most lenders prefer to work with borrowers who purchase more than one vehicle to make sure the business makes enough money to repay the loan if an accident or breakdown occurs.


Risk factors related to getting a loan for a truck include having subpar credit, having minimal cash-on-hand, purchasing an older truck, being a new business, and being an owner-operator. If you are a new owner-operator, you may find it is difficult (if not impossible) to be approved for a loan because of your lack of revenue and credit history. If you have any of these risk factors, then it may result in higher interest rates or larger down payments.

Tips to Getting a Commercial Auto Loan


If you want to get a commercial auto loan successfully, you must be prepared with personal records and proper business documentation. To secure a loan, you need to prepare before applying. You have to clearly illustrate the need for the loan while assuring the lender that their risk is minimal.


The first step is to determine how much money you have for the down payment, the type of vehicle you need, and the purchase costs. The next step is to acquire the documentation that will prove you are the business owner, including any paperwork about ownership and partnerships.


You may also have to provide information about your personal credit history and credit score. This is particularly important for businesses that do not have an established credit history or that have poor credit. Be sure to speak with several lenders to find out what is needed, as some may have more requirements than others.

Getting the Commercial Vehicle You Need 


When it is time to purchase a vehicle for your business, using the tips and information here will help ensure you get favorable terms for the auto loan you acquire. Be sure to keep this information in mind, which will minimize issues. Being informed and knowing what to expect are the best ways to minimize issues while maximizing your ability to purchase the vehicles or truck that you want and need.


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