Is it better to buy or lease a van for business?

Lease or buy? What’s better for you and your business?

There are many different ways to finance a new van nowadays. But what’s the best way?

Well, that ultimately would come down to you, your budget and the needs of your business.

So, let’s weigh up the pros and cons for the two main methods of financing: leasing or buying.

What’s the difference between buying and leasing a van?

Put simply, when buying a van you pay a large sum outright and you own the vehicle.

With leasing, you pay manageable chunks each month and return the vehicle at the end of your contract.

Buying a van is an attractive idea if you like the idea of ownership, and want to own your van for years to come.

Or even if you are looking at a used van.

But you then get the hassle of selling it when you want a new van, and then dealing with the depreciation.

Leasing solves this problem. Because you never own the van, you don’t have to deal with the depreciation, or the costs of ownership.

Please note that there are types of leasing where you can decide to then buy at the end, or sell at the end of your lease. For example:

• Contract Hire
• Contract Purchase

Benefits of buying a van

The main benefit of buying a van is that once it’s paid off, it’s yours.

Whether you buy the van on a finance plan, like Hire Purchase, or you purchase it outright, you own the asset and can essentially do what you want with it – no catches. 

You can sell it on whenever you want, there are no annual mileage limits, and you don’t have to repair any damage if you’re not that fussed.

It does give you a lot more freedom, but those freedoms come at a cost. 

Disadvantages of buying a van

Buying a van can mean a large chunk of your hard-earned money coming out in one go, even if you’re looking at a finance plan. 

If you’re just starting out, or money is a bit tight, it can be tricky to find this sum and that means you can’t invest the money elsewhere in your business.

Ultimately, buying a van could impact your cash flow.

A new van will also start to depreciate the minute you drive away in it. So, when you do come to sell it on, you could actually lose money.

There’s also the hassle of trying to sell it. How long will it take to sell? Will there be any problems?

Benefits of leasing a van

There are a multitude of benefits that come with van leasing.

These include:

• Fixed monthly cost
• Driving a brand-new van
• No depreciation
• Tax benefits

Fixed monthly cost

Having a fixed monthly cost for your vehicle can be helpful when you’re working out your budget.

You’ll know exactly how much you’re spending on your van, and if you include a maintenance plan, you’re also covered for a lot of routine maintenance.

That means no more surprise garage bills.

Driving a brand-new van

You’ll also benefit from being able to drive the latest van models.

Not only are these generally safer, thanks to improved tech and driver aids, but they’re generally more comfortable too.

You’ll be able to enjoy the latest tech, with the latest security features. Keeping your van, AKA your livelihood, safe and secure.

Manufacturer’s warranty? Check.

And it’s highly likely you won’t have to MOT the van before the end of your contract, if you opt for a two or three-year lease.

No depreciation

There’s no need to worry about depreciation or the hassle of selling either.

Depreciation is already factored into your monthly payments, and if you opt for a Contract Hire or Operating Lease, you simply return your van at the end of your contract.

Have you seen that VED is increasing again? Well, this is no problem for you if you lease. The road tax is included in at least the first year of your lease, depending on what lease type you choose.

Tax benefits

You can offset 100% of your monthly lease payments against taxable profits for commercial vehicles. If VAT registered, you can reclaim VAT too. 

Disadvantages of leasing a van

Like everything good in life, there are some downsides.

These include:

• Don’t own the van
• Early termination fee
• Set mileage allowance
• Fair Wear and Tear Policy
• Sign-writing

Don’t own the van

If you like the idea of owning your van, leasing is likely not going to be the right finance plan for you.

Unless you choose a contract with the option to own at the end, like Contract Hire or Contract Purchase. 

Early termination fee

Early termination can be expensive too, so you’ll need to make sure that the van lease you pick isn’t just suitable for your business now, but also your business in two, three or four-years’ time. 

Set mileage allowance

Do you know how many miles on average you drive each year?

When chatting with us about your lease, we will set a mileage limit in your contract. This is so that the depreciation is more accurately calculated.

If you exceed your agreed mileage, there is an additional cost to pay.

Fair Wear and Tear Policy

The same applies to any damage to the van too.

Have you heard of the Fair Wear and Tear Policy?

This is set guidelines that the funder will have to adhere to. But don’t worry, you won’t be penalised for everyday wear and tear.

It covers more serious damage that might occur. We understand that a couple of scratches here and there might happen.

We’ve all been there, tucked into a hedge on those narrow country lanes.

Just make sure any substantial damage is fixed before you hand the van back, or you could be subject to an additional cost. 

All lease vans now come with ply lining as standard, so there’s no worries about any tools clanging around back there.

Signwriting

You can, however, sign write your van if you want to add your branding and services for some ‘free’ on-the-go advertising.

Should I buy or lease a van for my business?

At the end of the day, whether you buy or lease your next van will be down to your company's specific needs and budget.

If you’re not fussed about owning the asset, you like the idea of being able to budget easily, and you want to free up that cash to be used elsewhere, then leasing is going to be the right finance plan for you.

But if you really want to own your vehicle, then buying is likely to be the better option.