Whether your line of work involves transporting goods and large items or you work in a trade where your van becomes an extension of the toolbox, vans are vital for many different businesses. Regardless of what your business uses its van for, one of the most important decisions you will need to make is whether you lease or buy.
On the surface, the difference between leasing and buying a van for your business is ownership. If you buy a van, it belongs to your business following upfront payment. However, van leasing works on the basis that you make monthly payments and either return or purchase the vehicle at the end of the agreed term. These different agreements have a number of significant advantages and disadvantages and it’s vital that you understand these to be able to answer the all-important question of ‘should I lease or buy a van for my business?’.
Leasing A Van For Your Business
Business van leasing can take a number of different forms, including business contract hire, finance lease and hire purchase. All of these types of contract involve making an agreed monthly payment to a finance provider, usually for 2 to 5 years, in exchange for use of a new van. The van is typically returned at the end of this contract, though you can opt to purchase with some agreements. The following advantages and disadvantages may sway whether this is the right method of accessing a van for your business.
Advantages Of Business Van Leasing
There are a number of huge advantages when it comes to leasing a van for your business which may mean that it is the right choice for your needs. These advantages include:
One of the primary advantages of leasing a van is the fixed monthly cost. Once an initial larger payment has been made, you’ll then make pre-agreed monthly payments until the contract ends. This can make it easier to budget and manage business cash flow and also carries the additional advantage of lower upfront costs in comparison to buying a van outright.
Typically, leasing a van for your business comes with tax benefits. Providing your business is VAT registered, the monthly payments can be tax-deductible as a business expense. This offers the opportunity to make significant savings when it comes to your taxes.
Access Newer Vehicles
When you lease a van, you can get access to the most recent vehicles. This makes van leasing a great choice for businesses that want to stay up to date with the latest technology and van features, as you can upgrade to the latest model when your initial lease comes to an end. If you choose a contract hire agreement, there is also no worry when it comes to depreciation as your vehicle gets older.
Reduced Maintenance Requirements
Leased vans typically require very little maintenance due to their age and low mileage. A manufacturer's warranty will also be included in most business van lease deals, with additional maintenance packages available for a reasonable additional charge. Furthermore, vehicles that are less than 3 years old require no MOT, so these additional costs do not need to be factored in when leasing a van for business.
Disadvantages Of Business Van Leasing
While there are a number of clear advantages to leasing a van, it’s important that you are just as mindful of the pitfalls of this method of acquiring a van. These disadvantages include:
Van Has To Be Returned
The key thing to remember when leasing a van is that your business does not own it. While there are options to purchase your van at the end of a business lease deal, you will usually have to give the van back to the finance company at the end of your contract. This can be a significant disadvantage if you are the type of business that likes ownership of its assets.
Mileage Can Be Restrictive
One of the conditions of a business van lease deal is that you agree to an annual mileage at the start of the agreement. Forecasting how many miles you or your employees are likely to drive over the course of the lease can be tricky, but it’s important that you get this as accurate as possible as exceeding the agreed mileage can lead to an additional charge at the end of the term. Do note that you may also incur additional costs if the van is returned damaged.
Buying A Van For Your Business
Buying a van is the main alternative to leasing. If you have the capital available to make your purchase outright then this method can be a favourable choice.
Advantages Of Buying A Van
The main advantage of buying a van for your business is that you have complete ownership of your new vehicle. This means that you can do whatever you want with your van without the constraints of agreed mileage and a fixed monthly outgoing. Should you wish to sell the van at any point, you are free to do so. Equally, you can keep the van for as long as you want which makes buying a van a popular choice amongst businesses who intend to use the vehicle for many years.
Disadvantages Of Buying A Van
While ownership does come with significant benefits, buying a van requires a significant upfront investment which many businesses simply cannot afford. On top of the initial cost, you will also be responsible for both planned maintenance and unplanned repair costs which adds additional expense. Should your business need its cash for other things, buying outright is most likely not the most suitable option.
Another downside of buying a van for your business is the depreciation risk. Vans will depreciate over time, which can result in a loss of value for your business if you are planning to resell the van at some point to recoup your initial investment.
Explore Your Options
Ultimately, the decision to lease or buy a van for your business depends largely on your needs, financial situation and long-term goals. While buying provides ownership and no mileage restrictions, leasing offers predictable expenses, access to newer vehicles that might otherwise be unattainable, and lower upfront costs. Weigh up which factors matter the most to your business to decide which option is most suitable for your business.
If you come to the conclusion that leasing a van is the best course of action, get in touch with the expert team here at Intelligent Vehicle Finance. We can help you find the perfect van lease deal from our constantly evolving range of van lease deals.