A Complete Guide to Van Finance
Being able to get from A to B in a reliable vehicle is essential for business owners. From courier services to tradespeople, having a professional fleet of vehicles will provide a wide range of benefits. But, before you buy a van you need to consider the finance options available.
Sometimes the best way to finance a van is not necessarily buying it outright. Depending on your needs and affordability, you should also consider other finance options such as contract hire, lease or hire purchase.
If you’re struggling to decipher which finance option is right for you, the experts at Van Sales UK are here to help! In this useful blog, we explain the most common finance options available. Read on for all you need to know.
Which cheap van finance options do I have?
As mentioned, buying a van in cash is not your only finance option. If you don’t want the financial risks of van ownership then hire or lease options can be a great choice. Buying a new van may seem like a simple decision but you need to consider the financial implications.
It’s best to do your research beforehand or gain expert advice from an experienced team like Van Sales UK. Choosing the most appropriate way to finance a van will not only make your purchase a practical investment but you can find the best deal for your affordability.
Here are the four top vans to finance your commercial fleet.
Contract hire is a type of lease agreement. When you buy a van this way, you pay a monthly fee that’s agreed by yourself and the contact hire company and at the end of the contract you must hand the van back.
The monthly cost will include your arranged mileage allowance and sometimes additional things such as breakdown cover which is a great perk. During your hire period, the leasing company is liable for associated risks so you don’t have to worry about anything going wrong with the vehicle and being handed a big bill – this can provide great reassurance.
How much you pay will depend on forecast depreciation which is calculated on the original cost of the van, the mileage it will run and the length of your contract.
The benefits of choosing contract hire include:
- Corporation tax relief is available against the lease rental charges.
- You can minimise the stress and financial risk of vehicle ownership.
- You can fund many types of vans using this finance option.
- Reduced car fleet administration.
If you’re unsure whether to buy vans on finance or purchase them outright, a finance lease agreement is a good compromise. Finance Lease is a flexible lease option with no mileage limits or damage recharges, however, you can mark the van as an asset on your balance sheet.
However, the vehicle will remain as the company’s property. The monthly price you pay can be paid over the lease period with interest charges or you can pay lower monthly rentals during the lease period with the addition of a final balloon payment. The balloon payment is based on the expected resale value of the van.
This set-up is similar to contract hire, but it’s important to note that issues such as damage to the car or excess mileage will often incur a cost that needs to be paid.
The benefits of choosing a finance lease include:
- You can add the vehicle to your balance sheet to receive tax exemption benefits.
- You can spread the cost.
- No worries about depreciation.
If you don’t have the money to pay for a vehicle outright but you do want the option of ownership, hire purchase could be the best way to finance a van. In most cases, you will need to put down an initial deposit (usually 10%) and cover the rest in monthly instalments.
These types of agreements can last anywhere between 12 months and 60 months depending on your needs. Once you come to the end of your agreement, you will be offered an ‘option to purchase’ fee so until that is paid you will not fully own the vehicle.
During your hire period there are no mileage fees. Although the initial cost will be higher than other options the main difference is that you’re heading towards ownership rather than rental.
The benefits of making a hire purchase include:
- Flexible repayment terms can fit in with your monthly budget.
- Hire purchase can be a good option for those with low credit scores.
- You can spread the costs.
- Your capital is not tied up in a depreciating asset
If you have the money to buy a new or used van outright then a cash purchase may seem like the most practical option. Not only will you avoid finance agreements but you will also own the van so there are no limits around your mileage, for example.
Making an outright purchase is perhaps the easiest way to buy a new van. Once you’ve chosen the van you want, the cash price is paid upfront and the van is yours! For some business owners,
Having said that, many businesses or sole traders still like to buy their van outright because it means that they own it and it is often their most important work tool. As an asset of your business, it also means that if you need to trade, sell or swap it, you can do so whenever you want to or need to.
Although the initial cost is hefty, once you’ve handed the money over the van is yours and you don’t need to pay anything else unlike vans on finance. Alternatively, you can get a loan from a bank or building society to cover the initial cost with fixed monthly payments to repay the loan, making it easy to budget over a long period.
The benefits of making a cash purchase include:
- You can customise the van with your business name and details since you don’t need to return the van.
- You can claim the cost of buying a van as an expense on your income tax bill, therefore, saving you money.
- You can sell your van whenever you choose as you aren’t tied into contracts and you officially own the vehicle.
How do I know which is the best way to finance a van?
Deciding which finance option is best for you is an important decision. Don’t rush into anything, instead, think carefully about your vehicle needs and the requirements of your business.
Consider the following questions:
- Do I have enough money to buy a van outright?
- What will I gain through van ownership?
- Will monthly repayments put me in a better position?
- Are you happy to agree to mileage terms?
Buy a Van on Finance From Van Sales UK
At Van Sales UK, we offer affordable van finance options to suit your needs. We understand that having a reliable fleet is essential for business owners and that’s why we aim to bring you great van finance lease deals and more.
Whether you’re looking to buy a van that’s brand new or an older model, our team will understand your requirements to help you find a make and model that’s tailored to you and available at the right price point.
We have made our finance application simple and it can be completed online. Don’t worry if you’re unsure which option is best for you, we’ve helped hundreds of business owners secure a great deal. Get in touch with us today and buy a van with flexible finance options.