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How to Choose Environmentally Friendly Vehicle Financing for Your Business

Here’s a not-so-fun fact: traditional petrol-powered cars are some of the biggest contributors to greenhouse gas pollution today. 

This is in large part because of the content of their tailpipe emissions – blasting harmful chemicals like nitrogen oxide, carbon monoxide, and particulate matter into the air. These not only harm the environment, but it can also harm human lives.

Furthermore, the average petrol-powered car emits 4.6 metric tons of carbon dioxide into the air per year. 

To put this in perspective, a mature tree can only absorb 48 pounds of CO2 each year. This means that an average passenger vehicle will need about 211 trees to offset the harm caused by its tailpipe emissions.

If you want to play your part as a responsible entrepreneur, you should heavily consider doing away with these ICE vehicles and switching over to more sustainable vehicles like EVs – even if they come at a higher upfront cost.

While electric cars aren’t completely free from environmental harm, they do less damage throughout their lifecycle. This makes them great options for businesses who want to support a green cause.

Furthermore, there are several financing options that your business can consider getting to make it less financially straining to acquire such a car.

Need help choosing an environmentally friendly vehicle financing plan? Here are five financing tips to help your business secure a sustainable vehicle for your operational needs.

  1. Consider Getting Government Grants

In places like the UK and Australia, there are many government grants and subsidies aimed at helping small to medium-sized enterprises fund an EV or EV charge point acquisition.

These government grants are generally good financing options, granted that you meet their respective eligibility requirements.

For instance, the UK has a grant called the Plug-in Vehicle grant that can pay for 20% of the purchase price of electric vans and trucks, up to a maximum of £16,000. So if your business is in the market for these vehicles, you can consider filling out and submitting an application form to try getting this form of financing.

There’s also a UK-based EV grant called the Workplace Charging Scheme that provides support for organisations that plan to build charge points at their establishment. This grant covers up to 75% of the total costs, capped at £350 per socket. 

Just like the other scheme, visit the EV grant website, fill out an application form and wait for the results. This scheme only goes on until March 2025, so be sure to fill out an application before then.

In Australia, there are similar schemes around for EV owners. One of which is the EV Charger Grants Scheme – allowing a grant of up to $2,500 for a business for EV charger installations. 

Some territories also have specific EV grants and rebate schemes, so be sure to check what’s available in your territory. 

Once you spot them, follow the instructions on the site, apply, and wait for results. You could end up saving thousands of dollars in total EV costs – which can be a big help for any small-to-medium sized business.

  1. Consider Leasing an Electric Vehicle

If you’re unsure of what type of EV you wish to buy, or if you don’t want to spend a big chunk of your money on an EV, then you can consider leasing an electric vehicle instead.

There are many car rental businesses and lenders that allow long-term EV rental arrangements. Feel free to pick the one that can give you the best deal. Finding the best deal is usually influenced by term length, car quality, and monthly fees.

By leasing a vehicle, you have a lot more flexibility with your money and car choices

For instance, if you no longer want to keep your EV, or if you want to switch to a higher spec model instead, you can arrange with the lender to do so as long as you’re not breaking any other conditions of the lease.

Leasing a vehicle is also a good way to test different vehicles before committing. It can be frustrating to be locked in a lengthy contract with a vehicle that doesn’t optimally serve your business needs.

  1. Pick Traditional Auto Loan Options

Traditional vehicle financing options are also transferable to environmentally friendly alternatives. 

Take a look at some of these traditional car loan options that you can consider for financing your vehicle:

  • Secured auto loans: The lender maintains vehicle ownership until the borrower completes the entire payment term. The buyer pays lower interest rates but provides collateral (usually the car) as protection for the lender.
  • Unsecured auto loans: The lender keeps ownership until the borrower finishes paying the term. The buyer doesn’t provide collateral but may be subject to higher interest rates.
  • Chattel mortgage: The buyer owns the car outright but still needs to pay a mortgage assigned to the value of the car to the lender. This arrangement helps provide the buyer with tax benefits (click here to learn more).
  • Hire purchase: The lender retains vehicle ownership and allows the borrower to use it with a flexible down payment. The ownership transfers upon completion of all payments.
  • Personal contract purchase: Borrower makes a down payment and has the right to use the car. By the end of the term, the borrower can choose to make a balloon payment to keep the car. They can also decide to return it.
  • Novated lease: An arrangement wherein the employer leases the car on behalf of the employee. The employer deducts a portion of the pre-tax salary and uses it to pay off the finance company.
  • Dealer financing: Dealerships may offer enticing terms such as a 0% down payment, low-interest rates, or cash-back incentives to encourage car purchases. Terms vary among dealerships.

Besides these options, companies can also informally seek financial aid from friends, family, or angel investors. 

Be sure to search around and weigh various offers. Scrutinising your options can help you narrow your search for the best financing option for your business’s next environmentally friendly vehicle.

  1. Apply for Green Business Loans

Green loans are loans specifically meant for businesses that uphold or prioritise sustainable business activities. These activities include using solar panels as electricity sources, investing in green architecture, and keeping pollution levels low. 

These loans are provided by government institutions, banks, and other financial institutions. 

Companies often have dedicated programmes specifically designed to distribute these loans as well.

Some bank loans that sustainable, UK-based businesses can try to get include HSBC’s Green SME Fund, Lloyd Banks Clean Growth Financing Initiative, Barclays’s Green Loan, and Virgin Money’s Sustainable Business Loan.

Of course, these loan applications are subject to availability and eligibility, so be sure that your business has good financial health before contacting them.

  1. Evaluate the Conditions of the Contract

Assessing the terms of the contract is crucial to ensure that you know what you’re getting into when choosing your vehicle financing option.

First, look at the primary conditions – also known as the length of the contract, the initial down payment figure, and the interest rate. Additionally, figure out if the interest rate is fixed or variable, and if hidden fees are attached to this agreement. 

On top of that, determine the flexibility of the programme. Usually, you’d want to sign into something as flexible as possible to allow your business to adapt to changing market conditions. 

Lastly, consider the tax implications. For instance, you can claim tax deductions for interest paid on a loan. You can also get tax deductions from fuel, repair costs, and maintenance expenses.

However, for leased cars, these tax payments are mandatory and are part of the price imposed by the lender.

Be sure that you’re in touch with a finance professional at all times to ensure you’re on the right side of the law.