Financing a new van for your personal or business use does not necessarily mean a specific van loan, other options exist including a van lease – a really popular alternative to owning a vehicle outright.
Van leasing is similar in principle to a long term vehicle rental or hire agreement. It allows you to choose the exact vehicle for you, not just make, model and size but even down to colour and spec and, for a set monthly fee over an agreed time scale (usually several years) the van is yours.
OK, you won’t actually own the vehicle but it can ease cash flow and work out to be a cost effective alternative to buying, especially if financing with a van loan – a flat monthly fee, no depreciation to account for, no selling the vehicle or part exchange, optional full maintenance plan too meaning no general upkeep or repairs to budget for.
The process behind van leasing is very simple; you do the research and decide exactly what van you need, spend time and make sure you go for the most suitable van. You’ll then need to talk to the lease company, look at the different options available, decide what term you’d like the lease to run for (this will often be anything between 2 and 4 years), and agree terms and conditions.
With regard to capital outlay, very often you’ll be required to pay an initial fee and this charge will likely equate to three months leasing payments – it’s just like paying a deposit after which you’ll need to pay the flat, monthly agreed sum and continue to pay this over the term of the entire lease. When the term ends the van is simply returned to the lease company who will then typically sell the van on with some companies giving the previous lease holder the option to buy the van outright at a very competitive price.
If you are a business there are tax benefits too because a van lease is regarded as a hire agreement meaning that there is full tax relief on the monthly payments.
So what are the benefits of leasing a van instead of buying one?
A new van fully covered by manufacturers warrantee
Choice of vehicle to suit needs
A single, fixed monthly payment over a set term making the budgeting process easier
Low capital outlay – just a small deposit
100% tax relief
Van lease agreement bespoke to your needs (term, mileage, conditions etc)
Optional maintenance agreement to cover service and upkeep costs for an additional monthly charge
Just to complicate things a little there’s also a slightly different lease purchase alternative to a standard van lease package. This can be a good option if you wanted to buy a van but don’t have access to the capital required to do so – simply put it’s a way of financing a vehicle that can be financially beneficial to a business or VAT registered company.
With a lease purchase agreement you’ll get the same benefits as explained above in relation to a standard lease but in this case the lease company will calculate the residual value of the van – the estimated value of the van at the end of the agreed lease term based on current value and standard depreciation.
You make a down payment by way of a lump sum upfront followed by the monthly payments calculated on the difference between the retail value and the residual value and at the end of the contract the agreement is that you will make a final payment to buy the van (other options may exist at this stage such as part exchange, new lease etc). Lease purchase can work out beneficial particularly if the van hold its value well.
There are plenty of leasing options out there and numerous van lease companies – most main van dealers will offer a leasing package and may well be a good place to start. There are also specialist leasing organisations that cater for adverse credit and the sub-prime market meaning that for anyone with bad credit van leasing is still a good option to consider.