Does your business need better transportation to move your products and services? Do you need a van but you don’t want to buy a unit with an outright pay.
Do you know that there different funding options that you can choose to buy a brand new van?
There are two type of van financing—leasing and hire purchase. Different lenders are using different terminologies to address these types of van financing. Some lenders offer a mixture of features and benefits of the two types of financing.
Kinds of the van that can likely be supported by van financing
- Small van
- Medium van
- Large van
- Refrigerated van
- Crew van and minibus
Knowing about van leasing
Van leasing is also known as contract hire. It is like equipment leasing. The kind of deal is the rental agreement. You cannot own the van when you signed the deal. You are primarily hiring the van for a purpose and bounded by time under a signed contract.
Knowing about Van Finance
Van finance is also known as lease purchase or hire purchase. In this financing, you are buying the van on an installment basis. Commonly, dealership programs are offering van financing. Significant manufacturers of van unit are offering in-house financing.
Essentially, the financing is a long-term deal. While paying for the monthly payments like rental, at the end of the contract, you will own the van. It will be yours forever.
Financing lease- a mixture of van finance and van leasing
A combination of van financing and van leasing. Sometimes confusing and intimidating. However, it is useful because you are adopting a lease contract, but at the end of the agreement, you will own the van.
Once the end of your term, you can have two options, to give back the van to the supplier or pay a “balloon payment” to purchase the van. The basis of the balloon payment is the value of the van after the number of months of use, less the money you pay monthly. Hence, some lenders offer financing to pay the balloon payment.
Manufacturers in the UK that accept financing
What could be best for you? Van leasing or Van finance?
The overall answer is that it still depends on your situation and capacity to pay. The best way to decide what financing platform you will choose is to consider the period that you will utilize the van. Secondly, think of the future of the business. Consider your road map towards expansion and growth. Do you need a van for the new few years? Alternatively, you need one for just a couple of days or months.
Leasing could be an advantage if you want to keep on upgrading a van every few years. Most businesses, leasing is popular because you always have the option to use the brand new van and modern features every year.
When your business is conscious about public reputation and branding, then having a running brand new van in a regular year is an advantage. In leasing, you can assure yourself of driving a van with better upgrades.
Van leasing is more flexible than hire purchase. If the contract will come to an end and you don’t need a van then give it back to the supplier. Leasing is the most straightforward than buying and selling van every year.
Lease agreements have mileage limits. You need to take care of the van since you will pay for any damage.
However, if your business requires specific features like bulkheads, shelving, and others, then buying is more cost-effective than leasing.
Leasing if far better when it comes to cost. However, there is a business that buying a van is financially sensible and spread the cost using van finance.
Hence, hire purchase can also be better if your business will always need a van but usage may not be that heavy.
Whether you buy or lease a van, it will depreciate. Depreciation is a cost and not an investment. Consider depreciation when deciding what type of van finance you would access for your business.
· Tax Differences
Each type of van finance has varying tax implications. Typically, in a van leasing, tax is accounted in operation cost. Meanwhile, if you decide to buy a van using hire purchase or dealer finance, it will appear in the balance sheet at the start of the contract. There are differences in the calculation of your profit.
In leasing, you will always have the option to include maintenance in the agreement. In this way, you don’t need to think about servicing and repairs. Some businesses provide for breakdown cover and insurance packages in the leasing agreement.
In hire purchase, since you are the owner, you will also be ensuring and pay for the repairs and servicing.
· Cash flow
The most important consideration is your cash flow. Whatever type of van finance you will consider the monthly payments. The kind of van finance you will take will depend on the capacity of your cash flow. It is essential that when you decide what type to apply, your cash flow will not get problems.