Depending on your budget, buying a van might be a daunting prospect.
If paying for it is a concern for you, van leasing could be a viable alternative.
But how does it work, and is it worth it? Let’s take a look.
What’s the difference between buying and leasing a van?
Buying a van means that, eventually, you own it. You can pay for it in a few different ways:
- Hand over a wad of hard-earned cash
- Get a van loan to cover the cost, then pay the loan back monthly
- Take out a van finance agreement like hire purchase.
In the first two options, you’ll own the van outright. It’s yours. With hire purchase, you’ll own the van after you’ve made the last payment.
When it comes to van leasing, you never own it. The payments you make each month just allow you to use it.
You pay a fixed amount each month for a certain period – usually two or three years – and once the agreement ends, you give the van back. You’re then free to get another leasing agreement for a different van.
What are the advantages of buying a van?
Buying a van comes with a number of advantages:
- You own the van. This means you can sell it on when you don’t want it anymore and get some money back.
- You’re in a better position to negotiate and haggle if you’re paying in cash.
- No restrictions – you can use the van how you wish with no mileage restrictions if you buy it using cash or hire purchase.
- You might be able to trade in your old van to shave off some extra cash.
- There are no monthly payments if you pay for the van yourself.
- You might be able to offset the cost against your tax bill.
- You can maintain the van to whatever standard you like, so long as it passes its MOT.
What are the disadvantages of buying a van?
But there are also some drawbacks:
- It could be costly and take a big chunk of money out of your business if you buy it outright.
- You might need to pay a deposit and make monthly payments if you use van finance to buy it.
- If you buy a brand new van it will likely depreciate in value immediately.
- You’re responsible for the cost of repairs, which is likely to increase the older the van gets.
- You’ll have to sell your van or dispose of it yourself when you don’t want it anymore.
What are the advantages of a van lease?
Leasing a van instead of buying has a number of benefits:
- You can change your van every few years when your leasing agreement ends.
- There’s no problem with depreciation.
- Some lease packages might come with extras, such as breakdown cover.
- Fixed monthly payments could make budgeting easier, especially for businesses.
- If you use your van for business, the VAT on the lease payments could be tax deductible.
- Maintenance might be included in the deal so you won’t be responsible for it.
- You don’t have to sell the van on when you don’t want it anymore.
- Leasing might allow you to drive a newer van, which is likely to have lower running costs than an older model.
What are the disadvantages of a van lease?
But just as with buying a van, there are also some negative aspects to consider:
- You won’t own the van so can’t sell it on to make some of your money back.
- You’ll have to return the van at the end of the lease.
- If the van is damaged when you return it you’ll have to pay extra charges.
- You need a good credit history to get a leasing agreement.
- There’s a limit to how many miles you can drive the van each year. If you go over the mileage limit you might have to pay extra charges.
- You’re not usually allowed to make any major van modifications.
- There will be monthly payments to make.
Is it better to lease or buy a van?
The overall cost of the van is one of the biggest considerations. Buying a van outright tends to be the cheaper option, especially if you can part-exchange your old one and haggle on price.
But having fixed payments on a lease agreement could help if you like to budget and keep on top of your finances.
It also depends on how you plan to use the van. Lease agreements tend to come with restrictions like mileage limits or no modifications allowed.
If you’d prefer the freedom to do as you please with your van, buying one outright might be best if you can afford to.
Or if you want to own a van but can’t afford to pay for it upfront, van finance could be worth considering. This could be hire purchase, personal contract purchase, or a personal loan.
But if you‘d like the flexibility to drive a brand new van every two or three years, leasing could be the best option. It could also suit you if you don’t want the responsibility of owning one.
Van lease with insurance
Some van leasing agreements come with a built-in van insurance policy. You should look at the wording of the policy to check what you’re actually covered for though.
If your agreement doesn’t come with insurance, it’s worth comparing van insurance policies. Check that any policy covers you for however long you plan to use the van.
If you’re concerned about the cost of van insurance, here are some tips to keep your van insurance costs down.
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