Auto Loans

What is a Commercial Auto Loan?

business auto loans from American United FCU in Utah

If you need a vehicle for your business but lack the cash flow to purchase a car, truck, or van outright, you may want to shop for commercial auto financing. Business vehicle loans are available for any type of new or used vehicle that will support your company’s operations, whether you need to transport workers, travel to job sites, deliver products, or haul heavy materials. Companies can seek this type of financing through a dedicated vehicle financing company, dealership, credit union, or bank. You could also benefit from a commercial auto loan to refinance an existing loan with a high-interest rate. When your business plans to keep the vehicles in question for the long haul, explore the benefits of commercial auto financing.

What are the Terms of a Business Auto Loan?

With a commercial auto loan, the lender pays the full or most of the cost of the vehicle at the time of purchase. Over time, your company makes monthly payments on the loan with interest. When seeking this type of loan, it’s important to shop around so you can find the best terms for your budget and needs. Some of the aspects of the loan to consider include:

  • The repayment term, which can be as long as 84 months for a commercial vehicle
  • The interest rate of the loan, which could be as low as 3% to 4% if your business has a good credit rating or up to 18% for companies with a poor or limited credit history
  • The amount of the loan, which could be up to 100% of the value of the vehicle or less if you plan to put money down on the loan
  • Fees associated with the loan, such as an origination fee or prepayment fee
  • The available loan amount, which may range from $5,000 to $250,000

Every lender is different, so read the fine print carefully before committing to a commercial auto loan. For example, many lenders require a sizable down payment of 15% to 25% of the purchase price for an expensive commercial vehicle such as a heavy-duty truck or forklift. Even when the lender does not require a down payment, putting money down on the auto loan will result in smaller monthly payments and sometimes a lower interest rate.

How to Apply for a Commercial Auto Loan?

When you apply for this type of loan, you must provide personal financial documentation as well as information about your business finances. These details help the lender determine the level of risk associated with your loan, which influences the interest rate. The better your personal and business credit, the less you’ll pay for the vehicle over the life of the loan. Some of the documents you will need include:

  • Business license
  • Articles of incorporation, partnership agreement, or bylaws for your business
  • Federal Employer Identification Number from the IRS
  • Business cash flow statements
  • Business bank statements
  • Personal and business tax returns
  • Loan proposal detailing the reason for the loan
  • Down payment funds, if applicable

Individuals who have limited business credit and/or own more than 20% of the company may need to provide a personal guarantee. This means that if the company can no longer repay the loan, you become personally responsible for the payments.

At American United Federal Credit Union, we support our business clients with a range of auto financing options, including flexible Small Business Administration loans that can be used for vehicles as well as equipment, payroll, and operational costs. We offer rates starting at 3.24% for business auto loans with terms of 60 months, with available terms up to 84 months. With no prepayment penalties, you can pay off your loan right away when cash flow allows. Contact us today to learn more or start your secure application online.

 

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