Hey, amigos!
Got questions about van lease deals or just about van leasing in general? Well, look no further.
With van leasing offering a cheaper, easier alternative to Personal Contract Purchase (PCP) or buying a new van outright through a loan or finance company, it's no wonder that van lease deals are becoming an increasingly popular choice for companies, business customers, sole traders, and even those just looking to use a new van for personal journeys and leisure (yes, that's a thing). Better yet, if you want to lease a van, monthly fees usually work out less expensive than a massive one-off payment or deposit for a straight-out purchase.
Like all depreciating assets, vans tend to lose value overtime, but one of the main perks of leasing a van is that you won't have to sell it on and risk ending up having to pay a hefty balloon payment. Remember, a lease is basically a long-term rental agreement, so technically you won't own the van – that responsibility rests with the finance provider. Happy days!
But before you even think about putting pen to paper on a van lease agreement and paying the initial rental fee, it's important to pinpoint exactly what type of van you're after and how you plan on using it. For that, we've compiled a guide on the main van types and their various uses.
Comprende?
How Does Van Leasing Work?
Before diving into more detail on the advantages and disadvantages of van leasing, let's take a look at the actual van leasing process itself.
Choose your brand new van: Take your pick from a wide variety of brand new lease vans, whether that be a standard panel van, a medium sized van, a city van, or flatbeds or electric vans. (There's always some amazing deals available right here.) Of course, you'll need to bear in mind your monthly budget and how much you or your business can afford to spend each month.
Select your van lease deal: Choose your lease type, how long you'd like to lease for (typically anywhere from 1 to 5 years, but it can be less), along with your mileage needs. The mileage is very important, so be accurate with how many you think you'll cover as you don't want to pay excess charges. That being said, you may have some leeway to alter the mileage limit during the course of your agreement.
Breakdown cover, road tax and the full manufacturer's warranty will all be included with your monthly payments. Unfortunately, you'll have to cover van insurance yourself on a fully comprehensive policy.
Give the provider company your financial details: Securing credit will likely involve a credit rating check to make sure you can commit to the monthly instalments. Should you obtain finance, you'll then sign a van leasing contract and pay an initial rental fee, followed by the fixed monthly payments.
The exact cost of your fixed monthly payments is calculated based on interest rates, lease length, the van's value, mileage, and residual value. Generally speaking, though, the longer the contract, the lower your monthly fees.
Wait for your lease van to be delivered: Now it's a waiting game. A delivery date will be arranged based on whether the van is in stock at your time of order. If so, it can often take as little as 2 to 3 weeks to be delivered, but this could also depend on the manufacturer.
Oh, how could we forget to mention? Delivery is 100% FREE.
Sit back and relish the drive: Now that your van's delivered, it's time to get out there on the open road, keeping yourself and/or your business moving.
End of contract: After your final payment, you'll return your van to the provider who will usually collect it FREE of charge. In accordance with your lease agreement, take good care to ensure it's clean and in good condition. That's excluding any fair wear and tear as per the BVRLA, the definition of which can be fairly broad and probably covers more than you think (minor chips, scratches, etc.). You're then cleared of any further obligations and free to pick a brand new van model.
Well, now that you know how to lease a van, let's talk a little about the key benefits of doing so.
Pros and Cons of Van Leasing
Yep . . . there are a few cons to leasing a van, too. In general, though, the advantages of van leasing outweigh the disadvantages, particularly if you're only using a van for business-related purposes.
Pros
- Freedom to change lease van every few years
- Flexible contract duration and mileage terms
- Strong possibility of extremely short leasing periods (e.g. 1 - 6 months)
- Road tax and manufacturer's warranty are both included
- Low outgoings through affordable monthly payments spread over time
- No worrying about van depreciation or the need to sell the van on
- Smaller monthly payments than PCP
- Fewer repair costs
Cons
- You don't own the van (could also be a pro, depending on your needs)
- Fees if you don't return the van in good condition
- Terminating your contract early can be expensive
- Sticking to a mileage limit, with excess charges should you exceed it
- Must be insured with full comprehensive cover
- Limited freedom with regards to vehicle modifications
- Can require a good credit score. Although there are poor credit score options.
What Van Leasing Options Are Available to Me?
Business Contract Hire is the most common type of contract if you're leasing a van, usually catering to sole traders, partnerships and limited companies. This is van leasing in its purest form, with the lowest initial payment and monthly payments out of the three main options.
Business Contract Purchase is slightly different as options open up for you at the end of the contract. Contract Purchase is ideal if you're a VAT-registered company or business and want to own the van without the risk of ending up with a wildly depreciated asset. But unlike Business Contract Hire, your monthly payments tend to be a lot higher. You'll also have to make one final payment before receiving ownership.
Business Lease Purchase also gives you responsibility for the van at the end of the agreement. It's more popular with businesses that want to buy the vehicle without spending the money up front. Unlike with Business Contract Hire, Business Lease Purchase is purely a finance package.
Can I Lease a Van if I’m Self-employed?
Absolutely.
Otherwise known as sole-trader van leasing, it works just like ordinary business leasing. However, as you and your business are classed together, there's no need to pay any company van tax. That's because you're not an employee using the van as a company perk. Also, if your business is VAT-registered and you only use the van for business purposes, you can claim 100% VAT back from your monthly payments.
Make sure you have your documents to hand, such as your personal and business information, in addition to your business bank account information. You will also need a current bank statement.
Your ideal van obviously depends on what trade you work in. If you're a self-employed florist or electrician, a smaller and lighter van might be ideal – for example, a Ford Transit Courier or a Volkswagen Caddy. But where machinery and bigger loads are concerned, you're going to need a van with more loading space – say, a medium-built van like a Mercedes-Benz Sprinter, a Renault Trafic or even a larger-sized Luton or box van.
FAQs
How Does Van Leasing Work When It Comes to Credit Rating?
To be accepted for a lease agreement with a finance company, your credit application check has to yield an outcome of 'good' to 'excellent'.
Should that not happen, the finance provider may take other considerations into account, like if you've been keeping up with recent payments despite having a poor overall credit history, or if you're backed up by a guarantor. This may give the finance company more confidence in your ability to pay the monthly instalments on time. However, your best bet is to simply improve your credit rating. This can be done by:
Not going into overdraft
Paying your yearly or monthly payments on time (e.g. mortgage)
Paying off outstanding bills and clearing any credit card debt
What About Personal Van Leasing?
Personal van leasing is an alternative financing option if you're a sole trader or limited company and haven't traded in the past year, or if you just want a van for personal journeys. Or maybe you're just starting out and lack the credit history required for a business lease. Ironically, then, personal van leasing may actually make more sense for you if either of those is the case. Despite that, personal van leasing can be more expensive than business van leasing.
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Personal Contract Hire is the most popular long-term lease agreement if you're a private individual. Just like with Business Contract Hire, you use the van and then return it to the finance company with no further obligations.
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Personal Contract Purchase gives you the option of purchasing the vehicle at the end of the agreement. You can either buy the van outright for a lump sum or hand it back with no further obligations.
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Personal Lease Purchase is ideal if you're a private individual and want to own the van but don't have sufficient funds to pay for it upfront. With this type of contract, you'll pay the standard initial deposit and monthly fees followed by a balloon payment at the end of the contract.
Is Van Leasing Tax Deductible?
Fortunately, with van leasing, 100% of tax is deductible, meaning you'll be able to claim it all back so long as you meet the criteria. That's obviously because when you lease a van, you don't own it and that's an ongoing expense.
Can I Leave My Lease Contract Early?
Yes, it's called Voluntary Termination. However, doing so may land you some hefty cancellation fees – usually 100% of your remaining monthly rentals if cancelling in the first year, and 50% anytime after that. The exact amount can vary depending on the finance provider and how long you've got left on your contract.