HGV Finance Calculator

Heavy goods vehicles are among the biggest investments a haulage business makes. A new tractor unit or rigid can easily cost over £100,000, and few operators want to tie up that much cash. HGV finance spreads the cost so the vehicle can earn money while you pay for it.

Our HGV Finance Calculator gives a quick estimate of monthly payments, the VAT you'll need upfront and the total cost of finance. This guide explains how lorry finance works and what to think about before you sign.

The main types of HGV finance

Hire purchase

Hire purchase (HP) is the most common way to finance an HGV. You pay a deposit, then fixed monthly payments, and you own the vehicle once the final payment is made. For tax purposes you're usually treated as the owner from the start, which means you can claim capital allowances.

HP with a balloon payment

Many hauliers choose HP with a balloon, a larger final payment at the end. This keeps monthly payments lower, which helps cash flow, and suits operators who plan to trade the vehicle in at the end of the term to cover the balloon.

Finance and operating leases

With a lease, the finance company owns the vehicle and you rent it. VAT is added to each rental rather than paid upfront, and rentals are usually tax-deductible. Operating leases and contract hire often include maintenance packages and return the vehicle at the end, which suits fleets that replace vehicles regularly.

How to use the calculator (HGV Finance Calculator)

1. Enter the vehicle price excluding VAT.
2. Add your deposit, also excluding VAT.
3. Enter any balloon payment you're planning, or leave it at zero.
4. Add the APR from your quote.
5. Choose the term in months.

The calculator shows the monthly payment, total interest, the VAT normally due at the start of a hire purchase agreement, and the finance cost per week, which can help when pricing jobs.

A worked example

A vehicle costing £95,000 plus VAT, with a £9,500 deposit, a £20,000 balloon, an APR of 8.5% and a five-year term:

• Monthly payment: about £1,470 excluding VAT
• Total interest: about £22,700
• VAT due upfront on HP: £19,000
• Finance cost: roughly £339 a week

Lowering the balloon raises the monthly payment but reduces the total interest. You can test different combinations in the HGV Finance Calculator.

VAT on HGV finance

VAT is one of the biggest cash flow considerations:

• On hire purchase, VAT on the full vehicle price is usually payable at the start, often alongside the deposit. VAT-registered businesses can normally reclaim it on their next VAT return, but you need the cash in the meantime. Some lenders offer short VAT deferral loans to bridge the gap.
• On a lease, VAT is charged on each rental instead, spreading the cost.

Tax relief

Tax rules depend on your business, so check with your accountant. In general:

• With hire purchase, you can usually claim capital allowances. The Annual Investment Allowance lets most businesses deduct the full cost of qualifying plant and machinery, including commercial vehicles such as HGVs, up to £1 million a year.
• The interest on HP is usually deductible as a business expense.
• With a lease, rentals are generally deductible over the lease term.

Operator's licences and financial standing

To operate HGVs commercially, you need an operator's licence from the Traffic Commissioner. Part of the licence requirements is showing financial standing: access to a set amount of money for each vehicle on the licence. Lenders may ask about your licence and financial position, and the finance you take on can affect how you demonstrate financial standing, so plan both together.

New or used?

New HGVs come with manufacturer warranties and the latest emissions standards, which matter for clean air zones and the Ultra Low Emission Zone in London. Used vehicles are cheaper and have already taken their biggest depreciation, but may need more maintenance and might not meet the latest standards. Lenders finance both, though terms for older vehicles may be shorter.

Tips for getting a good HGV finance deal

1. Compare the APR and total amount payable, not just the monthly payment.
2. Check fees, including documentation and option-to-purchase fees.
3. Plan for the VAT if you're using hire purchase.
4. Be realistic about the balloon: will the vehicle be worth enough at the end?
5. Ask about early settlement terms in case you want to upgrade.
6. Consider whether a maintenance package makes sense.

Working out finance cost per mile

To price jobs accurately, many hauliers convert finance into a cost per mile. Divide your yearly finance payments by the miles the vehicle will cover in a year. For example, £17,600 of yearly payments on a lorry covering 80,000 miles works out at about 22p per mile, before fuel, tyres, maintenance, wages and insurance. Doing the same calculation for each vehicle helps you compare quotes and set rates that cover your costs.