If you are running a business that requires vans deciding on how to acquire them basically can lead you to one of two choices, do you lease them or buy them? What is the best and most cost-effective way of getting a van and which is better for individual or multiple vans?
Whether you’re a sole trader, small business or the fleet manager of a large corporate fleet you may have considered buying or hiring the vans you need. Van Leasing, not a vampire hunter or Dutch Footballer has become a popular choice with a huge range of vans on offer to suit almost any job. Is it necessarily the best option for you, we’ve weighed up the pros and cons of leasing a commercial vehicle to find out?
Leasing a Van?
Personal contract hire, more commonly known as Van Leasing is an agreement between you or your business and a finance provider who will provide you with a vehicle for a fixed period for a series of fixed monthly payments. You may be required to pay a document fee to secure your vehicle with your lease provider, this is a simple administration fee as often paid to the company charged with finding your vehicle and finance deals.
Having the liquidity to buy a new van, whether you’re a tradesman, SME or even a business with a large fleet can be a challenge, so a acquiring a vehicle without the need for such an upfront cash requirement makes a lot of sense.
Pros and Cons of Van Leasing
There are plenty of benefits to consider when leasing a van
Predictable monthly costs and low deposit
Understanding your vehicle as a fixed cost asset with a predictable monthly cost is a significant advantage to businesses looking to keep a close eye on costs and margins.
Flexible with early upgrade options.
If your lease is flexible enough you may be able to upgrade your vehicle early which allows you to operate a cleaner, leaner and more cost-effective van as often as possible. It is significantly more difficult to achieve such flexible vehicle usage with vehicle ownership.
committed to a vehicle through ownership can leave a value gap in your current and desired van. With leasing there is no such issue.
Depreciation is a thing of the past.
A leasing contract means that your Van’s depreciation isn’t your problem, simply hand the vehicle back when you have finished with it.
Lower maintenance and repair costs.
You should experience lower maintenance and repair costs for your vans when you lease them, particularly in the case delivery mileage vans. In most cases you will not be responsible for MOT testing your van, and you should experience minimal wear and tear costs on a brand-new van
No issues trading in your Van
You simply hand the van back at the end of your lease and walk away; you are then free to lease another brand-new van
Credit concerns need not be a problem
Regardless of your credit status most leasing providers such as vanleaseagent.com will consider any credit and business status. Regardless of whether you have been trading for three months or three years there are credit options available for you to secure your new Van. Keep in mind that you may be required to take a shorter-term lease if you have a particularly poor or new credit situations but that shouldn’t be a barrier to ensuring you get a vehicle.
Your credit score is only part of the equation, ultimately a decision will be made on whether you can afford to pay the lease. This is particularly useful for new businesses with plenty of start up capital or businesses who need to get to work with vehicles really quickly.
Get all the most popular makes and models.
You can get all the most popular makes and models and even brand-new models. A lower monthly payment to get the Van customised to your needs is a huge advantage for your business. Alternatively, you can access a wide variety of vehicles that are available within a week.
Lease costs are VAT deductible, so the savings you make by driving a new van are increased further by removing the VAT from the monthly cost. The fact that you are leasing the van off a business means that you are able to claim the VAT back off your monthly repayment as it is a business expense so the cost of driving the van just got cheaper still!
Downsides of leasing a van
You will never own the van
If you are keen to own your vans then your likely options for acquiring one now is to either go down the Personal Contract Purchase Agreement route and by the Van for high monthly installments, or simply by the Van with cash, but with prices on a basic Ford Transit starting at £26,500 that’s a lot to split over 36 payments.
You need to calculate your mileage before you take put the lease.
To take out a lease on a Van or a fleet of Vans then you need to calculate the mileage for each van as part of the contract. Get this wrong and it could put some limitations on how far you are able to drive without penalty. If you want to drive without limits, then this can be a downside. Get this wrong and you are going to find yourself paying over mileage penalties but get it right and you could make a tremendous saving.
Terminating your contract early can be costly.
If for any reason you need to terminate your vehicle contract, then you may find that it is costly to terminate your contract early. Study the lease agreement carefully to make sure that you don’t face any unexpected penalties.
Pay a deposit every time.
If you are leasing, you will have to pay either a deposit or a significant initial monthly rental every time you upgrade. There are lease options that do not require a deposit, and most good leasing sites will allow you to control your initial monthly rental, but it is always something to consider.
Leasing your van or vans is a great way to keep on top of your business’s vehicle costs. Understanding your vehicle costs is an important part of your businesses financial planning, by keeping your vehicles modern and up to date, you can cut down on maintenance costs and avoid depreciation of assets you own. If you can’t afford the outlay to actually purchase the Van from the start, then there is little to be gained by buying a van to own. Monthly payments will significantly out weigh those of leasing and by the time the vehicle is yours and you have paid off the PCP then you may find that your maintenance costs have increased to the point that you are not achieving any real savings.