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Are you considering financing a vehicle for your business?
If so, there’s one question business owners like you ask more than any other.
“What are the rates?”
If we could give an easy answer…
… well that would be totally cool…
…but it also would be totally wrong.
A lot of factors determine what auto financing for business costs.
Let’s go over them…
Commercial Vehicle Financing Rates: What are They?
The key term we are looking at is “commercial.”
There’s a huge difference between financing something for your business versus for personal use.
Here are some examples of business vehicles:
- A dump truck for hauling rocks
- An ambulance
- An SUV for driving tourists in
If your vehicle is used to make money, it’s considered a commercial vehicle.
This is important because the way lenders “price” deals is very different for commercial vehicles than it is for personal vehicles.
Loan rates will usually be higher for business vehicles than for personal vehicles.
The reason?
Financing for your business is much riskier than financing a personal auto. By “riskier” we are talking about the number of people (or businesses) that don’t pay.
For example, if personal auto loan defaults rise above 2%, that’s a real problem, but business auto loan defaults are typically much higher than that.
Because lenders have to take default risk into account, when you finance a vehicle for your business, the rates have to be higher than when you finance a personal car.
Want to learn more? Check out our Ultimate Guide to Commercial Auto Loans
What Determines Commercial Auto Financing Rates?
Several factors determine rates for finance business vehicles.
Here are the biggest factors:
Your credit:
Your personal credit and business credit (if you have any) both factor into the rates to finance a vehicle.
Lenders look at:
- Your credit score
- If you’ve financed a vehicle in the past
- How long you’ve had credit for
- How many tradelines you have (credit cards, car loans, mortgages, etc.)
- The dollar amount of what you have financed in the past
- How much of your revolving credit (such as credit cards) you are using
The better the above are, the lower your rates are likely to be.
How long you’ve been in business:
Time in business is almost as important as your credit when financing a business vehicle.
Companies with less than 2 years in business are risky.
The shorter amount of time you’ve been around, the higher your rates will be.
The economy:
When interest rates rise for the government, they rise for loans to purchase commercial vehicles too.
For example, in 2023, with mortgages around 8%, when they were 3% just a couple of years prior, rates and payments for commercial vehicles went up significantly.
