Hearse and funeral vehicle finance for funeral directors

Lenders judge a vehicle by what it would fetch if they had to sell it, and funeral vehicles vary on that test.

• Coachbuilt hearses. Specialist vehicles built on a car or estate platform with a narrow but active resale market among other funeral directors. New hearses are readily financed, and used examples from a dealer or coachbuilder are fundable with terms that shorten as the vehicle ages.
• Limousines. Matching six or seven seat limousines, often bought together with the hearse so the cortege matches. Funded the same way, usually on a single agreement with the hearse.
• Private ambulances and removal vehicles. Converted vans and estate cars for first calls and transfers. More conventional vehicles with a wider resale market; see business vehicle and fleet finance and van finance.
• Electric and hybrid hearses. A growing part of the market as clean air zones spread. Lenders fund them, although the resale market is newer and some prefer a larger deposit; see business electric vehicle finance.
• Horse-drawn hearses, motorcycle hearses and vintage vehicles. Fundable case by case, often through lenders that handle prestige and classic vehicles, and usually on a larger deposit.

Mortuary refrigeration, embalming equipment and chapel fit-outs are financed separately as equipment; see asset finance.

The arrangement of a funeral is largely exempt from VAT, so many funeral directors are not VAT registered, or are partly exempt because they also sell standard-rated items such as memorials and flowers. For most firms that means the VAT on a hearse is a real cost. On hire purchase it is payable at the outset, and some lenders will include it in the amount financed. On a lease it is spread across the rentals. A firm with meaningful taxable sales should ask its accountant how the partial exemption rules apply before choosing. On capital allowances, a hearse is a specialist vehicle rather than an ordinary car, and specialist vehicles are treated differently from cars, so ask your accountant how the rules apply to a hearse bought on hire purchase before you choose between the options; see asset finance and capital allowances for the general position.

Illustration only, with round hypothetical figures. A third-generation funeral director with two branches runs a hearse and limousine that are fourteen years old, and the city it serves is bringing in a clean air zone that the old diesels will not meet. It orders a new coachbuilt hearse at £130,000 plus VAT and a matching limousine at £110,000 plus VAT, with delivery in nine months. The purchase is arranged like this.

• The two vehicles go on a single hire purchase agreement over five years with a £24,000 deposit, so £216,000 is financed and the firm owns both vehicles after the final payment.
• VAT of £48,000 is due on delivery. The firm is not VAT registered, so the VAT is a real cost. The lender agrees to include it in the agreement rather than ask for it with the deposit, which raises the financed amount to £264,000.
• The finance is approved on the order and the agreement starts on delivery, so the firm is not paying for vehicles it does not yet have.
• The old hearse and limousine are sold to a dealer and the proceeds reduce what the firm needs to borrow for the livery and the removal van it replaces at the same time, which goes on a separate three-year agreement.
• The lender's question is whether funeral numbers and the firm's profit after existing commitments comfortably cover the new repayments over five years.

A five-year term on vehicles the firm will run for a decade keeps the repayments ahead of depreciation. Monthly figures depend on the lender and on the deposit, which is why we show firms more than one offer before they sign the coachbuilder's finance paperwork.

• The coachbuilder's or dealer's quote, showing vehicle, conversion, livery and VAT separately
• The last two years of accounts and recent management figures
• Three to six months of business bank statements
• A schedule of existing finance, including any vehicles still on agreement
• For a used vehicle, its age, mileage, registration and the seller's proof of ownership
• For a new funeral home, a short business plan and evidence of the owner's experience

A new coachbuilt hearse has a long build time, so the finance is usually approved months before delivery and the agreement starts when the vehicle arrives. Used hearses and limousines from specialist dealers are a sensible route for a new firm or a second branch, and lenders will fund them, generally over a shorter term and with a larger deposit as the vehicle gets older. Age and mileage matter, and so does whether the vehicle meets the emissions standard for any clean air zone the firm works in, because a hearse that cannot enter the city centre has a weaker resale value. Like any other vehicle, a hearse needs an annual MOT once it is old enough, and a vehicle converted from a standard car may need approval through the GOV.UK vehicle approval process before it is registered, which a reputable coachbuilder handles. For older or unusual vehicles see used equipment finance.

Match the term to how long the firm will run the vehicle, and treat a balloon payment as a bill that falls due rather than as a saving. Check mileage limits and return conditions on a lease, because a hearse that is also used for removals can cover more miles than expected. If the firm is partly VAT exempt, make sure the VAT cost is in the comparison. A firm that finances its whole fleet and then wants to buy premises or another funeral home can find that lenders offer less, so tell your broker about the longer plan; see how to sell a funeral director business for how a fleet on finance looks to a buyer. If the firm's cash is tied up in disbursements rather than vehicles, a working capital loan may be the better tool.