Selecting your first commercial vehicle represents an exciting milestone. You might be a tradesman upgrading your ute or a small business owner starting your fleet. Regardless of the type of business you run, if this is your first business-related vehicle purchase, then the right financing can help you tick off this milestone without draining your cash flow.

It may feel overwhelming to navigate the various loan structures, interest rates, and credit checks to get where you want to go, so we have put together these handy tips to help you make smart decisions at this crucial juncture.

Read on for your guide to understanding and managing commercial vehicle finance in New Zealand, with plenty of tips to help you make the purchase that will serve you best.

Understand the Types of Commercial Vehicle Finance

First-time commercial vehicle finance buyers will usually choose from a few different popular options:

•       Finance lease, in which the lender buys the vehicle and leases it to you for a fixed term. You’ll then have the option to purchase it at the end of the lease.
•       Operating lease, which is quite similar to a rental. The vehicle stays with the lender, and you return it at the end of the lease term.
•       Hire purchase, in which you pay instalments over time, and ownership transfers to you at the end.
•       Chattel mortgage, in which you own the vehicle from day one, with the lender taking a mortgage over the asset as security.

The important thing to do is to know which type of lease you’re opting for and what that means for your ongoing finances and your final ownership of the vehicle you buy. For example, tradies and sole traders who want full ownership should go for a hire purchase or chattel mortgage structure. On the other hand, if you only need something short-term, then an operating lease would work well.

Know Your Budget and Stick to It

When the world of commercial vehicle finance options opens up to you, it can be tempting to use all that flexibility to purchase a top-of-the-line vehicle that might have otherwise been out of reach. And while that shiny new van or ute might be tempting, it’s more important to balance your wishlist with what your business can reasonably afford.

Before choosing a higher-priced option, factor in a few things:

•       Incorporate insurance, fuel, maintenance, and warranties when setting your total vehicle budget.
•       Use a commercial vehicle finance calculator to understand monthly repayments under different loan terms and interest rates.
•       Leave room in your budget for unexpected costs, like servicing, tyres, or GST changes.

A good rule of thumb to follow is to calculate your total monthly repayments for a given vehicle. Keep those repayments under 15% of your monthly business income to avoid cash flow drying up out of nowhere.

Prepare Your Paperwork

Applying for commercial vehicle finance can feel like a big job, especially when you do it for the very first time. Applicants often hit roadblocks when they don’t have the right documents ready for their commercial loan providers. If you want to avoid downtime, speed up the approval process by gathering the following:

•       Recent financial statements or proof of income
•       Business registration and GST number
•       Driver’s licence
•       Quotes for the vehicle(s) you’re looking to purchase

If you’re brand-new to business and don’t have much of a financial history, a strong personal credit score can go a long way. With your documentation at the ready and the right broker to guide you through securing your loan, your approval process will be simplified.

Don’t Forget Insurance and Maintenance

Finally, many first-time buyers of commercial vehicles forget the ongoing costs associated with owning a business vehicle. Some providers will give you comprehensive insurance from day one, while others will let you figure that out for yourself. Regardless, make sure to incorporate the costs of comprehensive insurance into your ongoing monthly costs, and consider adding the following:

•       Roadside assistance
•       Mechanical breakdown insurance
•       A prepaid servicing plan to lock in maintenance costs

Anticipating these costs helps you protect your investment in the long term and safeguard your business against unexpected expenses that can arise from owning one or more vehicles, especially if you operate a fleet.

With all this to think about, it’s no surprise that getting commercial vehicle finance can feel like a massive leap for first-timers. But trust us: with the right planning, it’s a seriously strategic step that can catapult your business to the next level. Do your homework, stay within budget (no matter how tempting shinier options are), and seek professional advice when you need it.

With a reliable vehicle and solid financial plan in place, you’ll be well on your way to building the successful business you envisioned on day one.

First time using commercial vehicle finance? Trust GVK Finance to guide you through.

 Need tailored finance advice? Talk to one of our commercial vehicle finance specialists today to drive your business forward with confidence. Get in touch here.