Refrigerated van finance

Chiller, freezer, or both

Three different vehicles, not three settings on one.

A chiller van holds a load at refrigerator temperatures and suits most food distribution, florists, catering supply and pharmaceutical work. A freezer van runs considerably colder, needs heavier insulation to hold it, and costs more to build. A dual temperature van splits the load space so you can run chilled and frozen in the same vehicle, which is the answer for a lot of mixed delivery rounds and the most expensive of the three.

We arrange finance for all of them, and from a lender's point of view there is no meaningful difference between funding a chiller and funding a freezer.

Who buys them

Food distribution and wholesale. Butchers, fishmongers and bakers. Florists, who need chilled transport for the same reason a greengrocer does. Catering and hospitality supply. Pharmaceutical and medical deliveries, where the temperature record matters as much as the delivery. Ice cream and frozen food distribution. And a good many businesses who simply found that their product does not survive the journey in an ordinary van.

If the vehicle is going to serve food from rather than deliver it, that is a different build and we cover mobile catering vans separately.

The problem is the valuation

This is the thing that catches people out, and it is worth understanding before you go looking for finance.

Most refrigerated vans are bought already converted, either as a factory-approved vehicle built by one of the manufacturers' certified converters, or as a conversion done to order on a base van. Either way you are buying one vehicle at one price.

The difficulty is what a lender thinks that vehicle is worth.

A good many of them look at a fridge van and see a panel van. They value the base vehicle, apply their usual rules, and give no credit at all for the insulation, the refrigeration unit or the hygienic lining, even though that work accounts for a substantial part of the price. The advance comes out well below what you are paying, and the shortfall arrives as a deposit you should never have needed to find.

We work with lenders who understand these vehicles and will lend against what one is genuinely worth.

Worth knowing that a factory-approved conversion, where the manufacturer and a certified converter supply the vehicle complete and it carries a single combined warranty rather than two, tends to be the most straightforward version of this for everybody.

New or used

Both work, and the difference matters more here than on an ordinary van.

A new refrigerated van, particularly a factory-approved one, is the most straightforward thing to fund. The vehicle and the conversion arrive together, the warranty covers both, and there is no argument about what has been done to it or by whom. It also attracts the longest terms, up to six years on a brand new vehicle. The one thing to plan around is time: if the conversion is being built to order rather than taken from stock, that build sits between you and the vehicle being on the road.

Used is where a great many businesses start, and the market is a decent size, partly because the hire companies run large fleets and those vehicles eventually come out of them.

Two things to understand about a used one.

The age that matters is the age at the end of the agreement, not the age today. A good many lenders want the vehicle to be no more than ten years old by the time the agreement finishes, and some will stretch beyond that. So a five year old van over four years is comfortable, while an eight year old van over five is a narrower field. An older vehicle does not rule the deal out, it reduces the number of lenders who will look at it.

And the valuation problem is sharper on a used commercial vehicle than a new one, because there is more room for a lender to fall back on a book value for the base vehicle and quietly ignore everything that was done to it. On a used commercial vehicle the gap between what you are paying and what a lender thinks it is worth can be wider than on a new one, which is precisely when it helps to be with a lender who understands the asset.

Check the payload, not the van's payload

A point that catches out more first-time buyers than anything else here, and it has nothing to do with finance.

Insulation is heavy. The refrigeration unit is heavy. Both of them come out of the payload the base vehicle started with, and on a 3.5 tonne van there is not an enormous amount of headroom to begin with.

So the figure that matters is the payload of the converted vehicle, not the one in the manufacturer's brochure for the van it was built on. Ask the seller for it in writing. A fridge van that cannot legally carry a full load is an expensive way to learn that lesson, and it is one of the few things on this page we cannot fix for you afterwards.

Buying or hiring

Refrigerated vehicle hire is a large and well established market, and for a short-term need it is exactly the right answer. A seasonal peak, a one-off contract, a vehicle off the road, and hiring makes sense.

The arithmetic changes when you find you are hiring more or less permanently. At that point the hire charges are a payment you are making every month for an asset you will never own, and buying generally works out cheaper over any reasonable period.

That is your sum to do rather than ours, because it depends on how much of the year you would actually have the vehicle working. But if you are renewing a hire agreement out of habit, it is worth doing.

Christmas, and why September matters

Refrigerated vans are seasonal in a way most commercial vehicles are not, and it has a direct bearing on when you should be arranging finance.

Food distribution peaks hard into Christmas. Ice cream and chilled catering peak through the summer. If your business has a season, the vehicle needs to be working before it starts, not during it.

Which means the finance wants arranging well before you need the van, for two reasons. The obvious one is that approval, payout and, if the vehicle is being converted to order, the build itself all take time. The less obvious one is that everybody else in your trade is buying at the same moment, so the stock that is available in September is not the stock that is available in late November.

If you know you need a fridge van for Christmas, the time to talk to us is in the early autumn. For a summer season, late winter.

If you have a contract, bring it

A lender assessing any specialist vehicle is trying to work out whether it will be earning.

A supply contract, a purchase order, or a standing arrangement with a wholesaler or retailer answers that question in a way nothing else does. It turns a hopeful application into a funded one and it is worth more than almost anything else you can put in front of a lender.

The reverse holds too. Finance requested for work that has not been won yet is a harder conversation, and usually means a closer look at your trading history and a deposit. So if you have the paperwork, send it with the application rather than waiting to be asked.

The VAT, and the cash flow problem nobody mentions

Worth a few minutes, because it is money you can keep in the business.

On hire purchase, which is what most businesses use when they want to own the vehicle at the end, the lender funds the price before VAT. The VAT is payable by you, up front, on day one.

At 20% of a fridge van that is a serious number. If you are VAT registered you will get it back, but the timing can be brutal. Buy just after your quarter end and you could be three or four months from reclaiming it, which is three or four months of your working capital sitting with HMRC rather than funding stock, wages and fuel.

Several of our lenders will defer it. The lender advances the VAT for the first three months and it sits on the finance document. There is some interest on it, but nothing is payable for three months, and it is usually added on top of the third monthly payment. By then your return has gone in, the money has come back from HMRC, and you use that to settle it.

On a lease this does not arise, because the VAT is charged on the payments rather than up front. Most businesses wanting to own the vehicle use hire purchase, which is where it matters. If you are not sure which of the two suits you, we have compared hire purchase and finance lease separately.

New businesses

A new food distribution or catering supply business needing its first refrigerated vehicle is a situation we see regularly, and yes, we can usually help.

With no trading history for the company, the lender looks at the directors. What carries these cases is relevant experience, meaning you have worked in or run this kind of business before, together with reasonably good personal credit. A signed supply contract alongside that makes a considerable difference.

There is more on van finance for a new business on its own page, and the same principles apply whatever the vehicle.

If you hire them out

If you rent refrigerated vehicles rather than running them, the conversation is a different one.

A lender funding a hire fleet is looking at how well the existing fleet is utilised, how old it is, and the quality of the customers hiring from you. The individual vehicle matters rather less than the business putting it to work.

Where it becomes practical is a credit facility, effectively a pre-approved limit for adding vehicles over time rather than a fresh application every time you buy one. If you are building a fleet rather than buying a single van, that is usually the arrangement worth asking for, and we can put one in place.

What we need and how long it takes

A few months of business bank statements and the invoice or quotation for the vehicle. And any supply contract, if you have one.

It can move quickly, often within a couple of days, and the pace is usually set by how fast the paperwork arrives rather than anything at our end.

Terms generally run up to five years, and up to six on a brand new vehicle.

What it costs

We have not put figures on this page because they move. There is a separate page on van finance rates which explains how rates are quoted and what lenders actually look at, and a finance calculator if you want an idea of monthly payments.