Commercial vehicle finance options | Don-Bur

Commercial vehicle finance options determine how trailers and bodywork are funded, paid for and managed over time. Don-Bur can introduce customers to independent third-party finance providers, with funding based on a clearly defined capital cost and agreed build specification.

We first issue a formal quotation confirming the capital cost of each vehicle. That quoted capital cost forms the basis of any finance proposal. Customers may proceed on a cash purchase basis or request that we obtain funding terms using that figure.

As we are not tied to a single finance house, we can usually source competitive terms across common commercial vehicle funding methods. Finance is provided by independent lenders and is subject to status, credit checks and underwriting.

Commercial vehicle finance structures generally fall into two broad categories: rental-based agreements and ownership-based agreements. The key distinction is who carries the asset value risk, often referred to as residual value or RV risk, and whether the structure is intended to return the asset or retain it.

Rental-based structures

Rental-based structures include operating lease and contract hire. In both cases, the finance provider purchases the asset and the customer pays for its use over an agreed term. Rentals are typically calculated using the capital cost, the contract term and an assumed residual value. RV risk generally sits with the finance provider, subject to agreed return conditions, and ownership does not transfer at the end of the agreement.

Contract leasing is a commonly used term for rental-based agreements such as operating lease or contract hire. It is not a separate finance structure, but a general description of fixed-term leasing arrangements where the asset is returned at the end of the agreement.

Operating lease

Operating lease is a rental-based funding arrangement in which the finance provider sets an assumed residual value at the start of the agreement and uses that assumption to calculate the rentals. An initial rental or advance payment may be required, followed by fixed periodic rentals over the term. The asset is returned at the end of the agreement and there is no ownership transfer. Maintenance and repair are not automatically included but may be arranged separately.

Contract hire

Contract hire uses the same core rental mechanism as operating lease. The finance provider funds the asset, sets the residual value assumptions and calculates an initial rental, if applicable, together with fixed regular rentals for the agreed term. The asset is returned at the end of the agreement and ownership does not transfer. The distinction is that contract hire is typically structured as a managed rental arrangement and may include maintenance and repair, often referred to as R&M, depending on the agreement and asset type. In trailer applications, R&M inclusion varies and is agreed separately.

Ownership-based structures

Ownership-based funding includes hire purchase and, economically, finance lease. These structures are commonly used where long-term retention is required and the operator intends to take, or remain exposed to, more of the asset's value over time.

Hire purchase

Hire purchase is an ownership-based funding method in which the asset cost is repaid over the agreement term through fixed instalments, usually following an initial deposit or advance payment if required by the lender. There is no residual value-based return mechanism in the same way as leasing because the structure is intended to lead to ownership. Title transfers at the end of the agreement once any final payment or option fee has been made.

Finance lease

Finance lease is economically closer to ownership than a pure operating lease. Rentals are typically calculated using the capital cost, the agreement term and an assumed residual value, but the customer has greater exposure to the asset's value performance than under a rental-based structure where the finance provider carries the RV risk. An initial rental or advance payment may apply, followed by regular rentals over the term. Ownership does not automatically transfer at the end, but the structure is commonly used where the customer expects to retain long-term economic use of the asset.

When each structure is typically used

• Operating lease: used where predictable rentals and return of the asset at the end of term are preferred, without ownership.
• Contract hire: used where a rental-based structure is preferred and a managed package, potentially including maintenance, may be required.
• Hire purchase: used where eventual ownership is the priority.
• Finance lease: used where long-term economic use is required without an automatic ownership transfer at the end of the term.

How the process typically works

• We confirm the asset specification and expected delivery date.
• We issue a quotation confirming the capital cost per vehicle.
• If funding is required, we gather basic business information for a finance proposal.
• A third-party finance provider offers terms, subject to status and underwriting criteria.
• Once approved, documentation is issued and the agreement is put in place for delivery.

Don-Bur acts as an introducer to third-party finance providers. Finance is subject to status, credit approval and lender terms and conditions.