The different types of bus financing

Financing a bus and coach fleet can sometimes be a challenge.

The good news is that this is a specialist marketplace that we at ACF Direct are proud to say we have considerable experience of. We’d like to share some of that knowledge with you by looking at some of the typical characteristics of bus and coach finance as outlined below.

Buses and coaches

Leaving aside the complicated area of the legal requirements for public transport operators, there are certain considerations from a commercial viewpoint that suggest the need to keep your fleet up-to-date.

Whatever market segment you are targeting, typically your customers and potential customers expect to see modern and attractive-looking vehicles being provided when you’re delivering services to them. The image of the tatty and ancient charabanc arriving to collect people is now confined to those 1950/60s comedy movies!

What that means is that many business owners and fleet managers need to regularly refresh their fleets in a competitive industry. That brings to the forefront of consideration, how to go about securing appropriate bus and coach finance.

Operating lease

The first option that is typically popular with bus and coach operators is that of the operating lease.

This typically involves the provider of funds purchasing a vehicle and then making it available to you for a specified number of years. Each month you’ll make a repayment to them and although you will have full use of the vehicle concerned, it is not your property and will be returned back to the funds provider at the end of the agreed period.

The big advantage of this route for bus and coach operators is that the total anticipated value of the vehicle over its lifetime is not covered by the operating lease. That means that when it is returned to the owner, the vehicle will still be assumed to have a value that needs to be recovered. That challenge sits with the vehicle’s owner and not you as the person leasing it.

The net effect of that is not only to give you a greater degree of freedom but it also typically reduces your monthly repayments. Keep in mind though that this means that the vehicle never becomes yours.

The vehicle may be treated as off Balance Sheet subject to your Auditor’s approval.

Finance leasing

In many respects, this is similar to the above. It does have a critically important difference though, in that the entire lifetime valuation of the vehicle will be covered by your monthly repayments over the agreed term.

That has three potentially significant effects:

  • the vehicle will be added to your balance sheet, with the monthly costs being treated as depreciation;
  • your monthly repayments may be higher than is the case with an operating lease, as a result of the above;
  • at the end of the lease you have three options:
  • enter into a peppercorn rental and continue using the goods. Generally this is one months rental payable annually;
  • sell the goods to a third party and retain typically 95% of the Net Sales Proceeds;
  • return the vehicles.

Hire purchase

In this bus and coach finance approach, a provider of funds will purchase the vehicle and allow you to use it as the “registered keeper”.

You will make a fixed monthly repayment over an agreed term, the final payment of which will mean the vehicle legally becomes yours.

Contrary to some misconceptions, this is not a loan and you will not own the vehicle at the outset. While you are making your repayments, you must not sell it or significantly modify it without the written permission of the owners in advance.

Typically you will need to find a percentage of the vehicle’s purchase price from your own financial resources, a procedure that is commonly called “finding the deposit”.


Due to the restricted space available here, we have only very lightly and superficially touched on the various advantages and issues associated with the above options.

Why not contact us for a more detailed discussion in the context of your exact business situation?