Story: MATT MORTON
NEED a new van? How are you going to finance it?
The traditional way small businesses have paid for a new van has been hire purchase or lease purchase van finance.
But you might have noticed there are some good van leasing deals around.
So what about these? Van leasing is often used by bigger van fleets, so why shouldn’t you consider this form of van finance for your SME van operation?
Hire purchase (HP) is a useful way to get a new van, but there are advantages to business van leasing.
Van leasing advantages
With a business van lease you don’t own the van – you lease it from the finance or contract hire company, then at the end of the term hand it back (subject to wear and tear conditions which you need to be sure about before you undertake a business lease). So no selling the old van.
Van leasing also provides you with another line of credit without drawing down large chunks of your operational cash, which could be used to fund growth of your firm. Or simply ensure you have enough cash in the bank for day to day operations.
A van lease also allows you to budget your monthly costs and smooth out any stressful financial spikes.
You will be subject to a credit check but these are usually swift – you will in most cases have to show a trading record to prove your creditworthiness, so expect this. Key assessment factors include the ability to repay the borrowings, the strength of customer base or contracts, the industry sector in which you operate, and your financial track-record.
According to finance company Lombard, typical agreement terms had not changed much in the past two years, however two distinct segments have polarised. For logistics and contractual work, both operators and lenders have looked to match terms while own account operators have usually kept to their original replacement cycles depending on assets – vans, trucks and trailers at three, five and seven years respectively.
Van leasing helps smooth your company finances during this economic period when money is tight