Business Finance For Vans
If you decide that the time is right to source your business a new van or a new fleet of vans, then it can be confusing to know exactly where to turn. Buying a new van can be very expensive. A lot of businesses nowadays simply do not have the money to hand to buy the van or vans that their business needs. Do you buy the vehicle(s) you need outright? Do you lease them? Or do you attempt to source yourself a finance option? If you have decided that the latter is the best choice, then you are in luck! There are two main options available to you regarding finance, each with its own specific terms, conditions, merits and fine-print details to consider. It is important to know the differences between the two so that you can make the choice that is best for you and your situation. We have pulled together this guide for you so that you can make an informed decision.
So, you have decided that you want to engage with van finance. Essentially, you have two main options open to you and it is these that we will be discussing in this guide. You can lease the van that you need. Or, you can engage with a system that is commonly known as hire purchase. There can be confusion regarding the differences between these two options and sometimes lenders or providers will refer to them by different names, will combine the two in some way or make changes some of the terms or conditions, but do not worry, we will make sure you know exactly what option is best for you.
Your Van Options
It is important to understand exactly what van you need for your business. With a vast range of different van types to choose from, this can be tricky. We have listed for you below all the different types of van’s that you can sourcing financing for:
- City Van – agile and perfect for city or urban use.
- Short Wheel Base – popular with tradesmen, moderate storage space.
- Long Wheel Base – provides lots of space and easy access via a side sliding door.
- Refrigerated Van – perfect for transporting perishable food goods and produce.
- Luton Van – the quintessential removals van, lots of space and a very high maximum load.
- Crew Van – smaller spaces available for tools but more seats for workmen.
- Minibus – used often by those needing to move lots of people, 9 + seats, average storage.
- Flatbed Van – a builder’s van of choice, lots of space for tools and equipment.
This is by no means an exhaustive list, and you will be able to source yourself funding for an even wider range of vans to suit every business need.
Leasing Your Van
Referred to often as contract hire, van leasing works in much the same way as equipment leasing and can also sometimes be named an operating lease. Contract hire is a rental. This means that you never own the van itself and when the contract expires you will have to return the van to the lender. It is referred to as a contract hire because you will be required to sign a contract that stipulates that you are hiring the van for a pre-agreed duration. Usually, this duration will be between 12 and 50 months however generally the lease length is up to you, or at the very least is negotiable.
Using A Hire Purchase For Your Van
This is a popular choice for businesses and business owners because you are buying your van in instalments and over a pre-arranged period of time. This is a long-term option and contract lengths often reflect this. Essentially, you are paying for your van each month and once you have made your final payment, then the van is yours, bought and paid for.
A Mixture Of The Two
As mentioned at the start of this guide there are some options that blend aspects of the contract hire and the hire purchase option. The perfect example of this is the finance lease option. With a finance lease, you have a lease in much the same way as you do with the contract hire, the main difference being that there is an option to buy once the contract itself has run its course. What this means is that once the contract is up, you can either return the van to the lender or dealership or pay for the van, the costs of which will be based upon a calculation which is typically; the value of the van after a 36 month period, minus the sum that you have already paid on the lease.
So, Which Option Is Best?
There will be benefits for each option and it truly does depend on what your specific business situation is. Start by asking yourself some questions:
- Are you going to want to upgrade the van/have the newest model?
- Is your need for a van temporary or permanent?
- Will your van needs change or evolve over time?
Main Areas To Consider
Upgrading Your Van:
With a lease, you can upgrade your van every 2-3 years. What this means is that you will always have the most modern vehicle with the best features; vital if the image is a large part of your brand identity. Or, you might be covering lots of miles, and the van will need replacing to keep it looking fresh and working well.
Once your agreement has concluded, you can give back the van if you no longer need it! This is far simpler than going through the buying/selling process.
Leasing Can Be Costly:
It can sometimes be more financially viable to purchase the van via an alternative finance option. If you are sure that your business will always have need of/will make frequent use of a van then a hire purchase option may be better for you than a lease.
Servicing, Maintenance, And Repairs:
A very important thing to consider when choosing between a hire purchase option and a contract hire is that with the former, you will ultimately be the legal owner of the van and therefore liable for all maintenance and repair costs. With a contract hire most providers will allow you to add a maintenance agreement, breakdown insurance et also you won’t have to cover these costs yourself.
Make The Best Choice For You and Your Business
A final piece of advice from us is to not get lured into a deal just because it has a multitude of added extras or bonuses. Think long-term! Now that you have all the information that you are going to need at your disposal, we hope that you are able to make the right choice for you and your business! If you would like to make an application for van finance, please do so here. To speak to us regarding a general finance query please do not hesitate to contact us.