Posted on Tuesday, 17th December 2024
As the UK is still experiencing economic shockwaves from the events of the last few years, we haven’t had a consistent economic outlook for quite some time. After almost four years of rising rates, The Bank of England cut interest rates in August 2024 and again in November, from 5% to 4.75%.
Interest rates affect the mortgage, credit card and savings rates for millions of people across the UK. And while borrowers welcomed the first drop in rates for more than four years, costs remain worryingly high for many.
Interest rates play a crucial role in shaping the financial landscape of any industry, and the UK’s commercial vehicle market is no exception. With fluctuating interest rates impacting borrowing costs, businesses looking to purchase trucks, vans, and other commercial vehicles must adapt their finance strategies. Here, we look at how changes in UK interest rates might influence the commercial vehicle sector and what buyers and sellers can do to navigate these shifts.
The base rate is the rate the Bank of England charges banks and other lenders when they borrow money. It’s designed to regulate inflation by encouraging people and businesses to either spend, save, or borrow.
Commercial vehicle finance plans are unique to each purchase and will depend on vehicle model, agreement length and deposit paid.
As with any financial loan, interest rates will determine how much extra you will pay for the car on top of the sum borrowed for the vehicle. You will borrow a set amount to buy the vehicle, which will either be the full price, or the full price minus a deposit. Interest is added to this to work out the total amount payable, which is then split into monthly payments.
Commercial vehicles are often purchased through financing options, such as loans or leasing agreements.
When interest rates rise:
Higher monthly payments: Increased borrowing costs make financing commercial vehicles more expensive.
Reduced purchasing power: Businesses may delay or downsize their purchases to manage cash flow.
Conversely, lower interest rates:
Encourage investments: Reduced borrowing costs make it more affordable for companies to expand their fleets.
Boost small business access: Smaller firms can enter the market with lower upfront costs.
Interest rates are just one piece of the puzzle when it comes to commercial vehicle sales; market demand, fuel prices, and government regulations also play critical roles. However, staying informed about interest rate trends and their implications is key to making smart purchasing decisions.
Strategies to navigate interest rate changes
Lock in fixed rates
Opting for fixed-rate loans or leases can protect businesses from future interest rate hikes, ensuring predictable monthly payments and better financial planning.
Explore alternative financing options
Businesses should consider options such as
· Operating leases: Spread costs without long-term commitments.
· Fleet management services: Outsource vehicle procurement and maintenance.
Take advantage of government schemes
Incentives for electric and low-emission vehicles can offset some costs, making sustainable fleet upgrades more accessible even in a high-interest-rate environment.
Plan ahead for upgrades
Building a fleet replacement schedule helps businesses anticipate costs and make informed decisions about the best time to finance new commercial vehicles.
When making a decision on a new vehicle, our knowledgeable sales team can discuss the best options for you and your current finance solution.
To find out more about financing a vehicle from MM Acquisitions, please visit the Finance page of our website.
Visit us today
If you’re looking for the best place to buy used trucks or a commercial vehicle in the UK and Ireland, look no further than MM Acquisitions Ltd. Visit us at:
MM Acquisitions Ltd
The Willows
Millennium Road
Preston
Lancashire
PR2 5BL
Phone: 01772 556130
