Two hauliers ask Bedrock for the same headline number, say £600,000. One wants to buy six new tractor units. The other already owns twenty trucks outright and needs working capital to start a contract. These are not the same financing problem, and putting them through the same product is how operators end up over-geared with the wrong asset on the wrong term. The first is a fleet acquisition question. The second is an equity-release question, and the answer is usually sale-and-leaseback rather than a fresh term loan.
Acquiring vehicles: who you want to own the residual
When you finance a new vehicle, the real choice is who carries the residual value risk at the end of the term, and the product structures sort cleanly along that line.
Hire purchase puts the truck on your balance sheet from day one. You depreciate it, you claim the interest, and at the end of the agreement you own it outright. On a goods vehicle used wholly for the business, VAT on the purchase is generally recoverable, and HP lets you reclaim it upfront rather than spreading it across rentals. You take the residual: if used tractor-unit values hold up, the upside is yours; if they fall, that is your problem too. HP is the right call when you intend to run the vehicle well past the finance term, which is most general-haulage operators sweating an asset to 700,000 kilometres and beyond.
Contract hire flips it. The lessor owns the vehicle, sets a residual it is willing to stand behind, and hands the asset back at the end. You pay depreciation and interest over the contract and walk away from residual risk entirely. That suits operators on fixed-term customer contracts who want a known monthly cost and a clean fleet refresh every three to five years, particularly on specialist or rapidly-changing vehicles where guessing the resale value four years out is a real gamble. Finance lease sits between the two: on your balance sheet, but legal title and the residual stay with the lessor.
The depreciation curve is what makes this matter. A new tractor unit loses value fastest in its first two to three years, and late-model units under three years old hold value far better than those entering the four-to-six-year window, where monthly depreciation accelerates. Trailers behave differently again, holding value longer and more predictably than the units that pull them, which is why lenders will often advance more comfortably against a trailer fleet than against the cab fleet. Match the product to where the asset sits on that curve, not to the headline rate. This is the core of how asset finance is structured for transport fleets.
Refinance: turning owned trucks back into cash
The operator with twenty unencumbered trucks is sitting on dead equity. Sale-and-leaseback releases it. A funder buys the vehicles from you at an agreed value, pays you the cash, and leases the same trucks straight back, so nothing leaves the yard and not a single driver notices. You convert a fixed asset into working capital while keeping full operational use.
This beats a new term loan in specific, identifiable situations:
- You need cash for something other than vehicles. Funding a contract start, an acquisition, a VAT bill, or a yard purchase against the security of trucks you already own is usually cheaper than unsecured borrowing, because the lender is secured on a known, saleable asset.
- Your fleet is owned but your balance sheet is tight. Releasing equity from the trucks can be the difference between meeting the operator-licence financial standing test and falling short of it.
- You want to smooth a lumpy replacement cycle. Refinancing the older half of the fleet frees the capital to buy the newer half, instead of taking the whole hit in one year.
The constraint is the asset itself. Lenders advance against current trade value, not what you paid, and a fleet of eight-year-old Euro-6 units with high mileage will support far less than a three-year-old fleet on full service history. Funders read the maintenance records, the mileage, the MOT and tachograph compliance, and the emission standard before they put a number on the vehicles. A clean, well-documented fleet refinances at a higher advance than an identical fleet with patchy records, even though the trucks are the same age on paper.
The diesel-to-electric residual trap
The decision that catches operators out right now is residual assumptions on the powertrain. Diesel HGV residuals have held firmer than many expected, because the realistic timeline for electric tractor units on long-haul work keeps extending and demand for used diesel units stays solid. That is good news if you are refinancing a diesel fleet, because the security is worth more than the doom-laden forecasts of three years ago suggested.
Electric and the newest low-emission vehicles are the opposite. Residual values on electric commercial vehicles are softer and far less certain than the original projections, which means a funder writing a contract-hire or finance-lease deal on an electric unit is taking a residual position it genuinely cannot price with confidence. Expect that uncertainty to show up as a more cautious advance, a shorter term, or a higher rate on electric assets. If you are buying electric to hit a customer's emissions clause or a clean-air-zone requirement, hire purchase keeps the residual question with you rather than asking a lender to guess; if you want the lender to carry it, accept that they will charge for the privilege.
Which question are you actually asking
Before you ask for a number, decide whether you are buying capacity or releasing capital, because the products diverge from there. New vehicles point to HP, contract hire, or finance lease, chosen by who should own the residual. An owned fleet and a cash need point to sale-and-leaseback, priced on the current trade value of the trucks. Larger operators combining a fleet, a trade-debtor book, and stock can fold the vehicle piece into a single revolving facility through asset-based lending, which avoids running three separate agreements on the same balance sheet. Where the cash need is the operating gap between costs and customer payments rather than a capital event, that is a working-capital question and a different structure again. Bedrock's view across the transport and logistics sector is that the most expensive mistakes are structural, not a matter of a few basis points: financing a long-life asset on a short refresh product, or raising a term loan when the fleet you already own could have released the same cash more cheaply.