As a fleet owner, you know that vehicles are one of the biggest investments for your passenger transportation business. Investing upfront in buying new vehicles can put a huge dent in your working capital. That's why many businesses opt for a used passenger commercial vehicle loan to grow their fleet in a cost-effective manner. If you are planning to avail pre-owned commercial vehicle financing, read this blog to know more on used passenger commercial vehicle loans.

Features & Benefits: Used Passenger Commercial Vehicle Loans

When considering the expansion of your fleet, it is important that you understand the features and benefits of used passenger commercial vehicle loans in order to make an informed decision. These loans not only provide financial flexibility but also enable you to invest in quality vehicles without straining your budget.

They Help Spread Out the Vehicle Cost Over Time

The main benefit of used passenger commercial vehicle loans is that they allow you to spread the cost over predictable monthly instalments. Instead of paying ₹10 lakhs upfront, you can pay it over 5 years at ₹20,000 per month. This approach helps you avoid large unplanned expenditures and protects your cash flow for other business needs.

Banks and Non-banking Financial Companies (NBFCs) offer attractive interest rates, generally starting from 10% per annum on used passenger vehicle loans. While interest rates can be higher than new vehicle loans, used passenger vehicle Equated Monthly Instalments (EMIs) are lower due to the depreciated vehicle value. This makes the repayable amount and monthly instalments more affordable.

They Allow for Customised Loan Amounts and Tenures

One prominent feature of used passenger commercial vehicle loans is their flexibility. You can customise the loan amount and repayment tenure based on your budget and business goals.

Loan tenure of up to 5 years is commonly available. However, some financial institutions also offer longer 7-10-year tenure loans on select vehicles to lower the EMI burden. The loan amount can be customised based on the vehicle's resale value, model, age and your repayment capability.

They Aid in Refinancing Existing Loans

Many small business owners purchase used passenger vehicles through personal loans that can carry high interest rates. Used passenger vehicle financing allows you to refinance such loans at lower interest rates of typically 10-14% per annum.

By transferring your high-interest debt to a used passenger vehicle loan, you can reduce your monthly instalments and total interest outgo. This helps free up capital to invest back into the business.

They Offer Financing for Vehicles up to 5-years Old

Used passenger vehicle loans are typically available for vehicles up to 5 years old. However, it can be higher or lower depending on the loan provider’s eligibility criteria. The older the vehicle, the lower the loan amount approved since the resale value falls with age. However, you can still finance vehicles under 10 years of age at attractive rates with used passenger commercial vehicle financing, compared to personal loans.

Financing younger, 2- to 3-year-old vehicles can help acquire newer models with advanced features, which improves driver convenience and safety.

They Provide Loans for a Wide Range of Eligible Vehicles

Second-hand passenger vehicle finance is available for a wide range of commercial passenger vehicles, including tempo travellers, Sports Utility Vehicles (SUVs), vans, buses, and e-rickshaws. You can finance diesel and petrol variants. Popular brands include Tata Motors, Force Motors, Toyota, Mahindra, and more.

When applying for used vehicle finance, shortlist vehicles from reputed brands with good resale value, low maintenance costs, and durable for commercial use.

They Require Simple Documentation

Used commercial passenger vehicle loans require minimal documentation. Basic documents include Know Your Customer (KYC) details, business financials, vehicle invoices, Registration Certificates (RCs), and driver details. Many Pre-owned commercial vehicle financing companies have simplified digital processes, which speed up loan approval.

However, used passenger vehicle loans may or may not be collateral-free. Whether you need to provide collateral will depend on the lender’s eligibility criteria. So, if you are asked to provide collateral, the financed vehicle acts as its own collateral. Also, you may need to pledge any business or personal assets if the value of the used vehicle does not fully cover the loan amount.

Tips to Avail Used Passenger Commercial Vehicle Loans

Securing a used passenger commercial vehicle loan can significantly enhance your business operations, but it's crucial to approach the process with careful planning. Here are a few handy tips to factor in:

Consider Future Repayment Ability

When financing multiple vehicles, consider your future repayment capability. Buy passenger vehicles in phases so you do not over-leverage. Opt for a longer tenure on some vehicles to reduce overall outflow.

Also, set aside emergency funds to cover loan EMIs for at least 3 months. This provides a buffer in case you face temporary business losses.

Partner With the Right Lender

Evaluate used passenger commercial vehicle loan providers based on interest rates, fees and charges. Also, consider their industry expertise, digital processes and flexibility. Some seasoned players in the market offer second-hand passenger vehicle financing at competitive interest rates and quick approval timelines.

It’s always recommended that you compare loan quotes from multiple lenders before choosing one.

Conclusion

Used passenger commercial vehicle loan helps growing fleets acquire newer vehicles at affordable repayment costs. The flexible tenure and amounts allow you to customise the loan to suit your cash flows. However, do your due diligence, assess several passenger vehicle models and identify one that aligns with your needs, structure the used passenger commercial vehicle loan prudently, and partner with specialist pre-owned commercial vehicle financing companies. This ensures your fleet keeps pace with business growth in a financially stable manner.

FAQs

1. What types of passenger commercial vehicles are financed?

Loans are provided for financing various used passenger commercial vehicles including buses, mini buses, school/college buses, tourist buses, staff transportation buses, and other vehicles that have passenger seating capacity.

2. What is the minimum down payment required for a passenger commercial vehicle loan?

The minimum down payment is usually 10-15% of the asset value. However, the exact down payment percentage required will depend on the loan provider’s policies and your creditworthiness.

3. What documents are needed for a passenger commercial vehicle loan application?

Basic KYC documents needed include identity proof (Aadhaar, PAN, Driving Licence, Passport) and address proof (Aadhaar, Utility bill, Rent agreement). You will also need financial statements like the latest Income Tax Return (ITR), bank statements, profit/loss statements, balance sheets and any other income proof to establish repayment capacity.

4. What is the maximum loan amount and tenure available?

The maximum loan amount and tenure varies between financial institutions. Typically, loan amount can be up to 90% of the vehicle value while maximum tenure can range from 5 to 7 years. In some cases, pre-owned commercial vehicle financing companies can finance 100% of the vehicle amount.

What is the interest rate charged on used passenger vehicle loans?

Interest rates typically start around 9-10% per annum for second-hand passenger vehicle finance. The rate applicable will depend on the loan provider, loan amount, repayment period, and the borrower's credit profile. Those with higher credit scores may get lower interest rates.