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There are many ways to finance a new van, and each option will offer certain features that distinguish it from the others.
Finance options are usually designed to meet certain criteria, such as cost or convenience. For example, van leasing (or Finance Lease) packages are designed to be as cheap as possible - making new vans more affordable for sole traders and SME's.
Another option is Contract Hire, which is designed for convenience. Essentially a long-term rental, Contract Hire deals have some similarities to van leasing deals; you can opt for a maintained package (which covers servicing, brakes and tyres) but also differs significantly - you simply hand the van back at the end of your term.
Finally, there's van Hire Purchase. The choice for those wishing to own their van, a Hire Purchase agreement is the only finance package that allows you to do so.
There are a number of things that make up a van finance package. These include (but aren't limited to) deposit, term length, additional features and restrictions. Some apply to van leasing, others to van Contract Hire and van Hire Purchase.
Here's a handy breakdown of the ins-and-outs of each finance package.
| Finance type | Deposit required | Security deposit (refundable) | Finance deposit | Term length | Balloon payment | Road Fund Licence | Free delivery | Breakdown cover | Own the van | Mileage restrictions | usage restrictions | Repair costs | Servicing & Maintenance |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Finance Lease | YES | £500 | 3 rentals down | 2-5 Years | YES | 1 Year | YES | 1 Year | NO | YES | YES | YES | Optional |
| Hire Purchase | YES | £500 | VAT Deposit | 2-5 Years | Optional | 1 Year | YES | 1 Year | YES | NO | NO | NO | NO |
| Contract Hire | YES | £500 | 3 rentals down | 2-5 Years | NO | Full term | YES | 1 Year | NO | YES | YES | YES | Optional |
The finance company will also require a minimum initial payment (referred to as a rental for van leasing and Contract Hire packages) of around three monthly rentals. In addition, all our finance packages can be taken for a period of 2 to 5 years and all come with free delivery and a year's breakdown cover. But what are the differences?
In simple terms, a van leasing package involves paying an initial rental to the finance company - the lowest initial rental that can be accepted is equal to three monthly rentals. Once you've completed your term, you'll need to sell the van to cover a balloon payment. The van leasing balloon payment is calculated using the van's age at the end of your term, along with your projected mileage. As a result, exceeding your projected mileage could affect the value of your van when the time comes to sell. It's not possible to own your van with a van leasing package.
There are some usage restrictions attached to a van leasing package. The first is mileage (as already described), the second is with regard to signwriting; all signwriting must be done with removable vinyl (or similar substance) to avoid damage, and finally there should be no custom modifications of any kind without prior approval from the finance company.
Included with the van leasing package is 1 year's Road Fund Licence (road tax), a year's breakdown cover and free delivery.
You can choose to include servicing and maintenance with your van leasing package for an additional charge. You can also extend your lease by a further 12 months.
If convenience is your main priority, then a Contract Hire package is definitely worth considering. Just like a van leasing package, you pay an initial rental to the finance company - the lowest initial rental that can be accepted is equal to three monthly rentals.
During your term, you must stick to the agreed mileage provision. Failure to do so will result in additional charges which are calculated by the mile. If you've opted for a maintained package then all servicing, brakes, tyres and warranty repairs are covered, which helps to budget and keep costs to a minimum. Contract Hire packages also include the Road Fund Licence for the duration of your term, along with free delivery and a year's breakdown cover. It's not possible to own your van with a Contract Hire package.
There are some usage restrictions attached to a Contract Hire package. The first is mileage (as already described), the second is with regard to signwriting; all signwriting must be done with removable vinyl (or similar substance) to avoid damage, and finally there should be no custom modifications of any kind without prior approval from the finance company.
Once you've completed your term, you simply hand the van back. The van must be in a good state of repair, otherwise you'll be liable for any repair costs.
Probably the most straight-forward option of the three is van Hire Purchase. As the name suggests, this is the only van finance package that allows you to acquire ownership of your van.
Generally, van finance companies will look for a VAT-only deposit for Hire Purchase agreements. The benefit of this is that your monthly repayments are not subject to VAT (but only if you paid a VAT deposit). You can pay a lower deposit, subject to approval from the finance company. You can also opt to include a balloon payment, if you want to lower your monthly repayments. Bear in mind that by doing this you will have to cover the balloon payment at the end of your agreed term.
With van Hire Purchase, the van is yours to keep - so there are no restrictions. You can cover as many miles as you need to, use the van in whatever way you please (within legal limits!) and plaster it with your company logo! Servicing and maintenance are your responsibility - there are no maintenance options with Hire Purchase.
Included with all van Hire Purchase deals is a year's Road Fund Licence, breakdown cover and free delivery.
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