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If you are looking to upgrade your van or fleet for your business, there a multiple buying options available to secure a new commercial vehicle.
Here we explore the different finance options to give you all the information you need to decide which finance option is right for you.
One of the most popular finance options for commercial vehicles is a Business Finance Lease.
This is a hire agreement which allows you to drive a new vehicle for a contractual period - usually referred to as the 'lease period'.
Using this method, you'd ordinarily pay an Initial Rental before then reverting to fixed monthly payments for the duration of the contract. It is important to note that you won't own the vehicle outright during this term.
There is also the option to include a balloon payment at the end of the agreement, which will serve to reduce your monthly payments. This allows you to pay any remaining credit on the vehicle. This gives the option to sell it on behalf of the finance provider.
If you sell the van for more than the balloon payment, you retain the equity minus a fee to the leasing company. If you sell for less, then you would cover the difference.
You also have the option of retaining the vehicle and financing the balloon payment. Full hand-back steps are covered in our End-of-Lease Options guide
Hire Purchase is a way to buy to purchase the van with the flexibility of choosing how much deposit you pay upfront and the term of the agreement.
This is a fixed interest agreement so the monthly payments will not change during this time.
This is secured against the vehicle, and you will not own the vehicle until you have made all payments as stipulated in the original agreement, including any option to purchase fee.
It is possible to settle the agreement at any point by paying the settlement figure quoted by the finance company.
Another popular option to drive a new van is Business Contract Hire, which is fixed cost motoring that includes a pre-agreed mileage and will lead to the vehicle being returned after a set term.
Under this agreement, the vehicle is hired for a set term at fixed monthly payments. This comes after an Initial Rental is paid before reverting to fixed monthly fees for the remainder of the agreement.
Contract periods can range from 24 to 60 months before the van is returned to the finance company assuming it falls within general wear-and-tear guidelines and hasn't exceeded the pre-arranged mileage expectation. You may be liable for additional fees at the end of the term if the vehicle is returned with damage or excessive wear.
Monthly rental fees will depend on the value of the vehicle, the length of the agreement and the agreed mileage.
It is possible to build servicing and maintenance packages into the monthly payments, which assists in managing any unpredictable costs and helps ensure your van remains in an acceptable condition upon its return at the end of the agreement.
Need to compare running costs or tax relief before deciding? Check the Running Costs guide and the Tax Benefits guide for the full picture.