Should I Lease a Van or Use Van Hire Purchase?
If the time has come to invest in a new van, it is worthwhile taking a moment to understand the different finance options available to you, including leasing a van and using hire purchase.
A finance deal presents the opportunity to drive a brand-new van of your choosing in return for monthly rentals or payments over a contract period.
This allows you to spread the cost over an agreed term rather than investing a large amount of capital upfront. Doing this allows you to absorb many of the costs via your business while ensuring you have the use of a modern, safe, economical and practical van.
There are key points that differentiate Van Leasing (also known as Contract Hire) and Hire Purchase, so it is important to understand what sets them apart to determine what works best for you and your business.
New Van Contract Hire
Contract Hire is the option for those who like convenience. The main benefit of taking a new van on a contract hire agreement is that you simply hand the van back at the end of your term.
Sometimes referred to as a 'long-term rental', mileage restrictions will apply to contract hire agreements, and should you exceed them a charge is usually applicable. This charge should be clearly detailed during the process of acquiring a van.
Other usage conditions will include damage and signwriting. Normal damage due to regular 'wear and tear' is not usually penalised, but any significant damage will incur a charge.
With regard to sign writing, the practice is allowed but should be removed prior to returning the van. Damage charges apply here too, so be sure to use a 'safe' substance like removable vinyl to avoid damaging the paintwork.
In the same way as a van leasing package, both non-maintained and maintained deals are available on a van contract hire agreement.
New Van Hire Purchase
If you want to own a van at the end of your contract period, then Hire Purchase will work for you
With a van hire purchase agreement, you pay a higher deposit than you would on a van leasing or contract hire deal. This is normally 20% - equal to VAT - which means that your monthly payments are not subject to VAT, as it has already been paid.
Van Hire Purchase deals are the most expensive, but this is to be expected as you are essentially buying the van, albeit over an agreed term.
The benefits include no mileage or usage restrictions, while there are no concerns with regards to vehicle condition.
The Key Differences Between Leasing a Van and Hire Purchase Vans
Van Leasing
- You never own the van and it must be returned at the end of the contract period
- Lower monthly payments
- Typically lower initial rental
- Typically fixed mileage limits with penalties if exceeded
- Must be returned in agreed condition
- At the end of the agreement you return the van or renew the lease
- Vansdirect offers options maintenance packages to include servicing, MOTs and repairs
Hire Purchase
- You own the van after the final payment
- Monthly payments are usually higher than leasing a van
- Typically higher deposit required
- No mileage restrictions
- No return conditions concerns
- At the end of the agreement, you own the van
The Benefits of Van Leasing
- Lower monthly costs
- Easier to budget fixed monthly costs
- Access to new vans on a regular basis
- Maintenance packages can be included
The Benefits of Hire Purchase
- You own the van at the end of the contract
- No mileage concerns
- No return condition concerns
- Best option if you plan to keep your van for a longer period
Who Would Be Best Suited for Contract Hire (Van Leasing)?
Van drivers that might have a high cash-flow focus would benefit from the fixed monthly rentals that can allow businesses to better budget on a rolling basis as a result.
If your trade would benefit from having the newest, safest and most reliable vans (with a manufacturer warranty applied), then Contract Hire is best for you.
Who Would Be Best Suited for Hire Purchase?
Sole traders planning on keeping their van for a longer period would likely benefit from using Hire Purchase, as it allows for manageable monthly payments with the opportunity to own the van outright at the end of the term.
This would also work for businesses that carry out higher mileages on a regular basis as there are no restriction concerns, as well as those that might consider selling the vehicle and can therefore build equity into it.
