Van Finance for Couriers

Van finance for couriers is commercial vehicle funding arranged for delivery and courier businesses, most commonly through hire purchase. Hire purchase suits courier work particularly well because it carries no mileage limit and no return condition charges, unlike contract hire or leasing, and the agreement can be settled at any point if the business wants to change the van.

A courier van works harder than almost anything else on the road. Multi-drop work means constant stopping, starting, loading and idling, and the mileage mounts up in a way that would take a plumber six years to match.

That does not make courier businesses difficult to finance. It does make some finance products a poor fit, and it makes the condition of the van you start with more important than it would be for most trades. Here is what actually matters, and what we can do that a dealer's finance desk cannot.

Looking for a different trade? See our van finance by trade guides.

Why hire purchase suits courier work

Most van finance products penalise mileage in one way or another. Contract hire and leasing agreements set an annual mileage allowance and charge you for exceeding it, and they charge again if the van comes back in worse condition than expected. For a business covering 30,000 or 40,000 miles a year and using the van hard every day of it, that is a bill waiting to happen.

Hire purchase has neither. There is no mileage limit and no return condition inspection, because at the end of the agreement the van is simply yours. You pay a deposit, then fixed monthly payments over an agreed term, and ownership transfers at the end.

The second advantage matters just as much for a growing business. On hire purchase you can request a settlement figure at any point, pay the agreement off and change the van whenever it suits you. On contract hire you are committed for the full term, typically three years, and there is no obligation on the leasing company to release you early. Courier work changes. Routes are won and lost, contracts change hands, and being locked into a vehicle you no longer need is an expensive place to be.

Our hire purchase vs finance lease guide compares the products in more detail.

Start with the best van you can afford

This is less about lender criteria and more about arithmetic.

A courier covering 35,000 miles a year will add 140,000 miles to a van over a four year agreement. The van needs to still be working, and still be worth something, at the end of that. So the sensible approach is to buy the newest, lowest mileage vehicle the budget allows, rather than the cheapest one on the forecourt.

The finance side follows the same logic. The older and higher mileage the van is at the point of purchase, the larger the deposit a lender will want and the shorter the term they will agree, because they are lending against an asset that is depreciating faster and has less life left in it. A tired van at a tempting price often ends up costing more per month than a better one, over a shorter term, with more of your cash tied up in the deposit.

Before you commit to a specific vehicle, send us the details. We will tell you what term is realistic on it and what deposit is likely to be needed, which is usually the information that decides whether it is the right van.

Our used van finance page covers how age and mileage are assessed more generally.

What we can do that a van dealer cannot

Dealer finance is convenient, and sometimes the rate is genuinely competitive. What it rarely includes is any of the following, and for a growing courier business these are usually worth more than a small difference in rate.

VAT deferral

On qualifying agreements the lender pays the dealer the full price including the VAT, then collects the VAT element from your business as a single payment after an agreed period, usually around three months. That gives you time to reclaim it from HMRC first. There is no charge for the facility. Dealer finance arms generally do not offer it, and most businesses have never been told it exists.

Little or no deposit

Dealers commonly ask for 10 to 20 per cent down. For a VAT-registered limited company with a reasonable credit profile, buying a van at a sensible market price, no deposit at all is a normal outcome with us. Our no deposit van finance page explains when that is realistic and when it is not.

A credit facility for the vans you have not bought yet

This is the one most courier businesses do not know is available.

Alongside financing the van you need today, we can often arrange an agreed credit limit that sits in place for the coming months, sometimes £50,000 or £100,000 depending on the business. If you win another route, take on a driver or decide to add a second vehicle in three or six months' time, the funding is already agreed. You can plan around it and move quickly, rather than starting a fresh application every time the business grows.

For a courier operation that expands one van at a time, that is worth more than a small difference in rate.

Specialist business finance advice

A dealer's finance desk sells a finance product. It is not their job to look at how the purchase sits within your business, and generally they do not.

Buying a van through the business rather than personally changes the position considerably. A VAT-registered business reclaims the VAT. Under a hire purchase agreement the van is treated as plant and machinery, so the cost can be written off against taxable profits through capital allowances, and the interest element of the payments is deductible separately. Whether hire purchase or finance lease gives the better outcome depends on your profits, your VAT position and how your accountant wants the asset treated.

We are a finance broker, not accountants, so the final word on your tax position belongs to your accountant. What we can do is structure the agreement so that it works for the way your business is set up, flag the points worth raising with them, and tell you when the product you have been offered elsewhere is the wrong one for your circumstances. Our hire purchase vs finance lease guide sets out the tax treatment of both in more detail.

The vans couriers finance

Courier work splits into different jobs, and the right van follows from which one you are doing.

The mid-size van does most of the work in this sector, and the Ford Transit Custom is the vehicle we see most often on courier applications. It is also one of the easiest vans to finance, because lenders see thousands of them and know exactly what they are worth.

Contract income and what lenders make of it

Most courier businesses work under contract, whether that is a parcel network franchise, a delivery service partner arrangement, or regular subcontracted work for a larger operator.

That shows up clearly on bank statements, and it is generally a positive. Regular payments from an established payer demonstrate reliable income, which is exactly what an underwriter wants to see. Where it helps to explain yourself is if the work is new, or if the income is concentrated with a single payer, because context turns a pattern on a bank statement into evidence of a working business.

Starting out as a courier

New courier businesses are one of the most common new business applications we handle, and the sequence is usually the wrong way round: the route is offered, and the van has to be on the road before the first payment arrives.

New limited companies and businesses under two years old can apply. Without a trading record, lenders lean on the director's personal credit history, and a deposit is usually required. Evidence of the contract or route you have been offered strengthens the application considerably.

Our new business van finance page sets out what lenders look for.

Sole trader couriers

A large part of the courier market is sole traders, so this is worth being clear about.

We arrange sole trader finance from £25,000, on unregulated credit agreements. The lenders we work with offer commercial finance only, and business lending is generally unregulated above that threshold. Below £25,000 a sole trader falls outside the commercial market, so if you are buying a van under that figure the practical options are to look at a higher value vehicle, or to consider whether a limited company structure suits your business, which is a conversation for your accountant.

Limited companies can borrow from £10,000.

Courier van finance with bad credit

A difficult credit history does not prevent you from financing a courier van. We work with specialist lenders who assess the whole picture rather than an automated score, and recent trading often counts for more than something that happened three years ago.

Where credit history is a concern, the condition and value of the van matter more than usual, because the lender is relying more heavily on the asset. A newer, lower mileage vehicle and a deposit both improve the options. Our bad credit van finance page explains how those applications are approached.

Electric vans for urban courier work

Urban multi-drop is the strongest case for an electric van of any commercial use. The routes are predictable, daily mileage is often within range, the van returns to the same place every night, and clean air zone charges apply almost every working day.

Electric vans are financed in the same way as diesel, and new ones qualify for the government plug-in van grant, which reduces the amount you borrow. Our electric van finance page covers the grant and the tax position.

Three situations we sort out regularly for couriers

Some of the best courier deals we place are the ones another broker or a dealer would have turned away. These three come up often enough to be worth setting out.

You have recently gone limited

A courier who has traded as a sole trader for years and then incorporates looks, on paper, like a brand new business. The company was registered last month. There are no filed accounts. To an automated assessment that is a start-up, regardless of the decade of trading behind it.

That is a presentation problem rather than a lending problem, and it is exactly the sort of case a broker earns their fee on. We recently placed finance for a courier who had been a sole trader for ten years and had gone limited in order to expand. We put the sole trader accounts in front of the lender alongside the customer's own background and experience in the trade, so the underwriter could see a decade of successful operation rather than a company with no history. It was approved, with a personal guarantee forming part of the package, which the customer was content with. He bought three vans.

If you have recently incorporated, bring your sole trader accounts and your trading history to the conversation. It changes the application completely.

You want to buy the van you are already leasing

This one surprises people. If you have leased or rented a van for three years, know it is reliable and would rather keep it than hand it back, you do not have to give it up.

We can finance the settlement figure from the leasing company so that you buy the van outright and keep running it for a further few years. You end up owning a vehicle you already know, with a known history, rather than starting again with an unfamiliar one. For a courier who has looked after a van and trusts it, that is often the better outcome than a fresh lease on something new.

Get the settlement figure from your current provider and send it to us with the vehicle details, and we will tell you what it would cost to own it.

You are buying privately from another business

Couriers often find a van being sold by another business, sometimes someone they know, sometimes a company advertising a vehicle it no longer needs. The price is usually well below a dealer's, because there is no forecourt and no warranty in the middle.

Plenty of lenders will not touch a private purchase. We can, provided the seller can demonstrate they own the vehicle outright and have title to it. We are happy to speak to the seller directly and walk them through what the lender needs to see, which is usually the part that stalls these deals when people try to arrange them alone. We have done this successfully several times recently for courier businesses, and the saving against dealer pricing is often substantial.

If you have found a van being sold by another business, tell us before you commit. It is usually workable.