The good news is that there are at least five different options, so read on to find the one that’s most suitable for your business.
To access a handy printable PDF version of this factsheet, simply complete your details below.
Here are 6 key points to think about:
- Watch your cash flow
- Save money – will your current van do the job?
- Daily rental provides pay-as-you-go use
- Lower monthly payments with contract hire
- Van purchase gives greater flexibility
Why should you read this?
- You’ve just started your own business
- You need a van for the business
- You want to know the options for funding the van
- What about the VAT?
1) The obvious: outright purchase
Buying your new business van direct from a local dealer is certainly the simplest route.
But finding the ready cash can be difficult and putting it on your overdraft facility or taking a bank loan can prejudice credit resources which you may need for other uses.
2) Contract hire with maintenance
This is a very straightforward solution. Following a low deposit of normally three months’ rentals, you pay a fixed monthly fee.
There are no unexpected costs and even the VED is taken care of
There are no unexpected maintenance costs and even the Vehicle Excise Duty is taken care of during the contract.
At the end of the contract, you simply hand the van back and take delivery of a shiny new vehicle as its replacement.
Make sure you’ve looked after it though as the contract hire company can ask you to pay for any damage or neglect that would not be considered fair wear and tear.
3) Just contract hire
Contract hire is also available without the maintenance element. The rentals are cheaper but be warned, you’re liable for all maintenance and repair costs.
The fair wear and tear conditions still stand, and the penalties can be high so make sure you understand your obligations.
4) Finance leasing
Like contract hire you pay an initial deposit and followed by a fixed monthly payment.
But this time there is a large payment at the end of the lease – normally equivalent to the van’s projected value. This is offset by the sale proceeds being returned to you.
- Fixed monthly cost
- Brand new vans at fleet prices
- VAT efficient
- Look out for the ‘balloon’ exit payment
If you want to, you can have the final payment, known as a balloon payment, varied or reduced to zero (fully amortised) but the monthly rental will then be higher. On the plus side, you’ll walk away with a ‘profit’ of whatever the van is sold for.
This can work as a blessing or a curse. Keep the van in good nick, don’t overdo the mileage, and the resale value of the van can be higher than the projected ‘balloon’ so you make a turn.
But if the resale value is less than the balloon, you have to pick up the difference.
As with contract hire you are responsible for the maintenance and repairs, and the van may be subject to a fair wear and tear inspection when you return it at the end of the lease. (Though Vauxhall waives this.)
So your decision may well come down to knowing how the van will be used.
5) Hire purchase
Good, old fashioned hire purchase is a safe option.
Effectively, you agree to buy the vehicle over a period, normally three years, paying by monthly installments.
At the end of the period you make a final payment and can then dispose of the vehicle or keep it on.
And of course, you’ll be responsible for maintenance and repairs as well as Vehicle Excise Duty.
It may seem obvious but in all cases, you’ll be responsible for insuring and fuelling the vehicle.
Finally, a note about VAT. If you are VAT registered you can reclaim VAT in full whether you buy or lease the van.
If you contract hire or lease it then the VAT on the rental is reclaimed when you make your periodic return.
If you buy or hire purchase, then you’ll have to pay the full VAT upfront and then reclaim it on your next return.
Of course, no VAT registration means no VAT reclaim. BUT, if you lease, you pay VAT on each regular payment rather than all of it upfront.
With interest rates typically at 5 per cent, you could be as much as £1000 better off if you lease a £20k van over 3 years, assuming a resale value of £5000 at the end of the lease.
Here’s what our sponsor has to say about van finance
Running a fleet of vans can be time-consuming and complex. So we offer a solution.
Vauxhall leasing benefits
- Fixed payments with no hidden costs or surprises
- A choice of contract lengths and mileage terms
- Choose with or without maintenance
- Low capital outlay
- Nationwide coverage
- VED and recovery included
Vauxhall Leasing is the contract hire and fleet management arm of General Motors UK Limited.
We’re supported by a network of nearly five hundred Vauxhall Retailers. This means we can bring you the benefits of a national contract with the back-up of local contacts right on your doorstep.
Vauxhall Leasing provides commercial vehicle funding and acquisition solutions to business operators across the UK.
For more on how Vauxhall can help you fund your new van visit our website where you’ll also find more useful information about Vauxhall vans and what they can offer your business.
Or why not call us? 0845 740 0777
And tell us what sort of finance you need.