Financing a '+VAT' Vehicle: What It Means and How It Works
If you've been browsing vans, pickups or commercial vehicles, you've probably seen prices listed as '+VAT', and wondered what that actually means for your budget.
Understanding how VAT works when financing a vehicle is essential, especially if you're a business owner or self-employed.
In this guide, we'll break down what '+VAT' means, how it affects your finance deal, and the smartest way to structure your deal.
What Does '+VAT' Mean When Buying A Vehicle?
When a vehicle is advertised as '+VAT', it means the listed price does not include Value Added Tax (VAT).
In the UK, VAT is typically charged at 20%, so the real purchase price is higher than the advertised price.
Example:
Vehicle Price = £20,000 +VAT
Vat (20%) = £4,000
Total Price = £24,000
This is especially common with:
- Vans
- Pickups
- Commercial vehicles
- Some business-use cars
Do You Have To Pay VAT Upfront?
This is one of the biggest questions, and the answer depends on how you're financing the vehicle
Option 1 : Pay VAT Upfront
In many finance agreements, you'll need to pay the VAT amount upfront as part of your deposit.
This means:
- Lower monthly payment
- Higher inital cost
Option 2: Finance The VAT
In some cases, you can include the VAT in your finance agreement.
This means:
- Smaller upfront payment
- Higher monthly payments
Not all lenders offer this, but it can be arranged depending on your circumstances.
Can You Reclaim VAT On A Vehicle?
If you're VAT-registered, you may be able to reclaim the VAT, but it depends on how the vehicle is used.
✅ Typically reclaimable:
- Vans used for business purposes
- Commercial vehicles
- Vehicles used exclusively for business
🚫 Usually NOT reclaimable:
- Cars used for personal use
- Vehicles with mixed personal and business use
It's always best to confirm with your accountant, as rules can vary.
How Finance Works On '+VAT' Vehicles
Financing a +VAT vehicle works very similarly to standard vehicle finance, but with one key difference: how VAT is handled.
At Motor Loans R Us, the process is simple:
- Apply Online - Start with a quick application
- Soft Credit Check - We assess your profile without impacting your credit score
- Lender Matching - We match you with lenders suited to your situation, including business and specialist lenders
- Approval & Finance Structure - We structure your deal based on:
- Whether VAT is paid upfront or financed
- Your deposit
- Your monthly budget
- Choose Your Vehicle - You can choose from any reputable dealer, knowing your budget in advance
- Sign & Driver Away - Once everything is agreed, you sign your documents and collect your vehicle
What Types Of Finance Can You Use?
You can finance a vehicle using:
Hire Purchase (HP)
- Pay monthly
- Own the vehicle at the end
- VAT is often paid upfront
Lease Purchase (LP)
- Lower monthly payments
- Final balloon payment
- Flexible VAT options
Personal Loan
- Own the vehicle immediately
- No link between finance and vehicle
Who Typically Buys +VAT Vehicles?
You'll commonly see +VAT pricing for:
- Trades people
- Business owners
- Fleet buyers
- Self-employed individuals
- Contractors
Especially those buying vans or pickups for work use.
Key Things To Consider Before Financing
Before committing, think about:
💷 Your Total Budget - Make sure you factor in VAT, not just the advertised price.
📊 Cash Flow - Paying VAT upfront vs financing can impact your monthly cash flow.
Tax Implications - If you're VAT-registered, reclaiming VAT could significantly reduce your overall cost.
Usage - Business vs personal use can affect both VAT and finance options.
