Choosing a new van is easy. Working out how you’re going to afford it is the hard part.
Times may be tough, but that rusting heap parked outside has no understanding of what stretched finances mean. So how are you going to replace it?
You’ve got two choices – buy or lease.
The difference between buying and leasing
Buying your car means getting a loan or paying for it outright. The benefit of this is that it belongs to you.
The alternative is leasing. When leasing a vehicle, you never own it – you pay a monthly fee for the use of the van. However, with some schemes you can pay a lump sum at the end of the lease period to buy the vehicle outright.
The pros of buying a van
Buying is a good option for several reasons:
It tends to offer the best value. When you’re negotiating with cash, you’re in a good position to haggle down the price and get a deal.
If you’ve already got a van, you can trade it in and save even more on the purchase.
You’re not restricted to a mileage limit, often a pitfall of leasing a van.
Most importantly, the van is yours. It’s an asset, a part of your business. If you need to trade, sell or swap, you can do so whenever you want.
The pros of leasing a van
Leasing a van has a number of advantages, not least the fixed monthly cost:
It’s best suited to those who like the idea of driving a new van every few years. At the end of the term, you can simply return it and walk away. Alternatively, you can take out another new van on a fresh agreement.
It’s a good option for businesses that don't want to pay out maintenance costs when vans depreciate.
Most lease packages also include maintenance and breakdown cover, which is easier on the savings. And if your van breaks down, the company fixes it and covers the cost.
Lease companies usually offer a choice of a straight lease or a lease purchase. The latter gives you the option to buy the vehicle at the end of the term.
So, buy or lease?
The most important factor is the cost.
Choose to buy and you’re taking the financial hit, as well as the responsibility of full ownership. It also means the depreciation, servicing and repair costs are all yours. But, if your finances are up to it, buying could save you money in the long run.
Leasing spreads the payments over time, and you can forget about additional servicing costs.
Leasing also removes some of the risk associated with owning a business. Leased vans aren’t counted as assets, therefore they can’t be used to pay off debts should your business go under.
However, leasing companies often impose a mileage restriction. This means if you exceed this mileage limit by the end of the lease term, you could be hit with hefty charges.
Also look at what van insurance deals are on offer. Some leasing companies include insurance for the specified driver in the regular payments.
Take a look at your balance sheet. If your business is prospering and you can afford to buy, perhaps that’s the best option for you. Slightly unsure? Maybe leasing is the way to go.