Outright purchase of your new van

This is where you buy the van and own it from the start. You are responsible for all costs associated with the van including car tax and maintenance.

It requires you to have the substantial funds to pay for the van up front which may be a big ask if you are a small business or run a tight cashflow.

The van will depreciate over time as you use it, but you will be able to benefit from the sale of the van when your dispose of it or upgrade in say three to five years’ time.

Acquire your new van with a finance lease

This means that you are in effect hiring the van for the period of the lease.

The lease will be for a specific period which is typically between two to five years.

You pay for the lease by fixed monthly payments which will include VAT. This has the advantage of knowing the amount of your payment in advance each month. Businesses can also normally recover the VAT and offset the leasing cost against trading profits.

Depending on your leasing contract, you may also have the option to acquire ownership of the van or to upgrade your lease to a newer van model. If you want to have these options, you should make sure that your agreement allows for it.

You should also bear in mind that there will still be an outstanding amount to pay if you want to own the van outright. This final sum is sometimes known as the “balloon payment” and it can be quite substantial depending on the original price and terms. The ‘balloon’ amount due can usually be financed and paid over an agreed period.

Alternatively, you could acquire outright ownership and sell the van at the end of the lease to cover the ‘balloon’ amounts due.

There are a number of other issues you need to factor in before deciding on leasing you van.

• Mileage- Your agreement will have an agree mileage limit. If you have exceeded this limit, then there will be an excess mileage charge to pay at the end of the agreement.
• Fair wear and tear- Normal wear and tear is allowable so it is important to take care of your van and do not ignore damage which may cost you at the end of the agreement.
• Changes like ULEZ- The new regulations like ULEZ are important if you live or work in areas impacted by the new regulations. Make sure that your new van in compliant before deciding on the best choice for the next two to five years.

Take out a van contract hire agreement

Contract hire is very similar to leasing in several ways.

You pay a fixed monthly sum like a finance lease, but the van is handed back at the end of the agreed contract hire period. The van always belongs to the leasing company, so you never have any risk associated with the value of the van at the end of the hire period.

Depending on the agreement, your servicing, tax and breakdown cover will be included in your monthly cost. The exact terms of your agreement are flexible and can normally be set up to fit with your requirements.

Like a finance lease you will have an agreed mileage limit and fair wear and tear conditions in your agreement.

Factors that determine the cost of your van lease

The cost of a van lease or contract hire will vary depending on a number of factors which you should consider before deciding:

• The cost of the vehicle- This will depend on the specification of the van that you choose. It is probably a good idea to consider several options and compare the cost of each.
• Residual value- The leasing company will look at the estimated residual value which involves a range of factors.
• Interest rates- The interest rates at the time and the expected rates going forward will have an impact on the likely monthly cost.
• Initial rental- The initial rental you pay at the start will have an impact on the recurring costs each month.

Get help with Van leasing

Leasing your new van can be a good idea but take advice before proceeding.

If you want some help and advice, get in touch with us at Tyson Cooper and we will help to get the best van for your money.