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Should you lease or buy your new van?

Posted on 21st October 2019

The best way to buy a new Luton van for your business isn’t always clear. In this article we go through the pros and cons of Finance Lease, Contract Hire and Hire Purchase vs buying outright.

Choosing the right finance option for your business, whether you’re a sole trader, small business or a large enterprise, is vital. In the demanding business environment we live in today, making sure you choose the best finance option can give you an advantage over competitors who find themselves cash starved after a Luton van purchase.

Here are a few advantages to financing or leasing a new low loader van instead vs buying outright.

ADVANTAGELEASING/FINANCINGBUYING
Lower up-front cost✅❌
Brand new Luton van✅✅*
Don’t have to worry about depreciation✅❌
Maintenance can be included (Contract Hire)✅❌
Better cash flow✅❌
You can sell your van whenever (also applicable to Finance Lease)❌✅
You own the van outright❌✅

*At a significant cost.

As a business, there are three main types of finance that you will see when it comes to buying a new van. These are Hire Purchase, Finance Lease and Contract Hire. There are important differences between each of these finance options. You can find comprehensive information about each of these finance options by following this link.

Finance Lease vs Buying New Van

This is a decision that should first be made on whether or not you want to own your new Luton van. If you want to own the low loader van, then a Finance Lease isn’t the best option for you. However, there are other finance options which do give you that choice, such as Hire Purchase.

Pros Of Finance Leasing A Van

Pros Of Buying A Luton Van Outright

  • You will pay fixed monthly costs for your Luton van so you can plan your business’ finances easily.
  • You tend to get the best value as a cash buyer.
  • You can drive a brand new van every few years (however long your agreement is). At the end of the term, you can simply settle the agreement by selling or returning the van, or pay a small fee to use the van for another year.
  • There will be no monthly payments appearing as a liability on your balance sheet.
  • You won’t bear the burden of depreciation. With depreciation usually comes increased maintenance costs and the need for an annual MOT after the Luton van is 3 years old.
  • The van is yours as an asset. You can choose to do whatever you would like with it. For example, you could make modifications that would not be permitted under a finance agreement.
  • There are no mileage restrictions associated with a Finance Lease.
  • You have the option of a low, variable deposit so you can adjust your monthly payments to suit your business.

Hire Purchase vs Buying Van Brand New

Hire Purchase is a great option for your business if you want to own your van without the strain of a cash purchase. Whether you are large, small or even a sole trader, if you are confident you want to own your Luton van at the end of your agreement, then HP lets you do that.

Pros Of Hire Purchasing A Low Loader Van

Pros Of Buying A Luton Van With Cash

  • You can spread the cost of the vehicle over a chosen period of time.
  • As with all finance options, Hire Purchase will work out more expensive than a cash purchase.
  • There are no mileage restrictions with HP.
  • You’re not restricted to any mileage limitations, although this is the same with Hire Purchase.
  • There are flexible payment terms, as well as a flexible initial deposit to fine-tune your monthly payments.
  • Once the van is purchased, it is yours to do whatever you want with.
  • You’ll have a fixed interest rate for the duration of the term.
  • Your fixed payments will not be subject to VAT as your initial deposit will pay all VAT upfront.

Contract Hire vs Buying New Low Loader Luton Van

Contract Hire is an extremely popular method of finance. Contract Hire agreements require a mileage limitation, but come with many benefits which make it an attractive option for businesses needing to operate a new Luton van without the stresses of owning the van.

Pros Of Contract Hiring A Low Loader Van

Pros Of Buying A Luton Van With Cash

  • You will have fixed monthly payments throughout the entire agreement.
  • Unlimited mileage – this is a large advantage when comparing with Contract Hire which has hefty fees for excess mileage, especially if your business racks up a lot of miles per year.
  • The initial deposit is low.
  • You will own the vehicle – Contract Hire gives you no option to own the van at the end.
  • You have the option to add full maintenance which can include servicing and tyres for a truly stress-free experience.
  • You can customise and do whatever you want with the van.
  • The vehicle isn’t shown as a liability on your balance sheet.
  • You just hand the van back at the end without any hassle as the funder disposes of the Luton van.
  • You can claim back 100% of the VAT if you’re VAT registered.

So what’s the verdict?

Each finance option has it’s own pros and cons that a business needs to weigh up.

For example, businesses operating in London (ULEZ Ultra-Low Emissions Zone) or any of the other new (CAZ Clean Air Zone) such as Derby and Leeds, having a EURO 6 vehicle is of utmost importance. Any van that isn’t EURO 6 will be charged £12.50 a day in the ULEZ, on top of the congestion charge of £11.50 if they enter London city centre between 7am-6pm on a weekday.

A business operating in the London ULEZ or a CAZ zone can be spending upwards of £3,500 extra per year by running a EURO 5 vehicle instead of a EURO 6 van.

This is a huge amount of money for each van, each year. For reasons like this, it can often be a savvy business decision to lease the newest vans with the latest engines, which adhere to the latest emissions regulations, under the bonnet to ensure you will never be paying for operating old technology.

Of course, for some businesses, buying with cash is still their preferred choice. For companies who rack up massive mileage (~30k+ per year), then a cash purchase works out much more economical than a mileage restricted finance option like Contract Hire.

Make the right choice for your business – you know your requirements better than anyone. Whatever decision you make, Maxi Mover are able to offer you the ultimate vehicle for the job.

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