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Should you buy or lease a van?

Depending on your budget, buying a van might be daunting. If paying for it is a concern for you, leasing a van for your business could be a better alternative. 

But how does leasing a van work and is it actually worth it? Let’s take a look.   

Van driver checking a form in their van 

What’s the difference between buying and leasing a van for your business? 

Buying a van, either through paying upfront or with a van loan, means you eventually own it. 

Leasing a van means you make monthly payments to use the vehicle but you never own it. You pay a fixed amount for a certain period, usually 2 or 3 years, and when the agreement ends you return the van. 

You can also lease-to-buy a van where, at the end of the agreement, you have the option of officially buying the van.

How does van leasing work?

Depending on who you choose to lease the van from, there are around 5 steps to leasing a van for your business:

  • Choosing your van and lease package: First, choose the make and model of the van you want to use. Once you've decided, you need to choose the type of lease you want and how long you need to use the van. You also need to give an estimate for the number of miles you expect to drive in a year. 
  • Providing your details: You then need to give them your financial details to help the company prepare the lease. The company may also arrange a credit check to ensure you can afford the monthly payments. 
  • Van delivery: You and your dealer should arrange a delivery date.
  • Driving the van: Depending on the length of your lease, you can then use the van for as long as agreed. 
  • Returning the vehicle: At the end of the lease, you need to return the van. You should clean it before it's returned. 

If you're using the van for business purposes, consider getting commercial van insurance to cover you for work-related usage.

What are my options to buy a van?

You can choose from a variety of van finance options. These include:

Hire purchase (HP)

HP is when you put down a deposit and then make monthly payments over a set period of time. These payments are fixed each month.

Once you've made the final payment, the van officially belongs to you.

There's usually no annual mileage limit. 

Personal contract purchase (PCP)

Here, you make monthly payments which should cover the van’s depreciation. These payments are often lower than what you might expect to pay with hire purchase. But you still need to pay a deposit.

At the end of the agreement, you have the choice of giving the van back or making a larger, final payment to own it outright.

But there’s often a limit on the number of miles you can drive.

Personal loan

You make monthly payments until the personal loan has been paid off. But it does give you the opportunity to buy the van outright.

You need to continually keep up with these payments until it's been fully paid off.

Those with good credit scores might see better rates when taking out a personal loan.

Balloon hire purchase

After paying a deposit, you pay a set amount until you own the van. You also need to make a final ‘balloon’ payment.

These monthly payments can be high. But you can lower them by paying a higher deposit or higher balloon payment. 

What are the advantages of a van lease? 

Leasing a van has several benefits:

  • You can change your van every few years when your leasing agreement ends
  • Van tax is usually included
  • 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
  • For business van lease, the VAT on the lease payments could be tax deductible
  • Maintenance might be included in the deal so you aren't responsible for it
  • You don’t have to sell the van 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?

There are also some negative aspects to consider when leasing a van:

  • You don’t own the van so you can’t sell it to make some of your money back
  • You have to return the van at the end of the lease
  • If the van is damaged when you return it, you might have to pay extra 
  • You need a good credit history to get a leasing agreement
  • There’s a limit to how many miles you can drive each year - if you go over the mileage limit you might have to pay extra 
  • You’re not usually allowed to make any major van modifications

What are the advantages of buying a van?

Buying a van comes with several advantages:

  • You own the van - this means you can sell it when you don’t want it, helping you get some money back
  • You’re in a better position to negotiate and haggle if you’re paying 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 take 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 to buying a van:

  • It could be expensive 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’s likely to depreciate in value immediately
  • You have to sell your van or dispose of it yourself when you don’t want it anymore
  • You're responsible for the cost of repairs, which is likely to increase the older the van gets

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 can be expensive if you're looking to buy new. If you're willing to go second-hand, buying could work out cheaper than leasing. especially if you part-exchange your old van 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.

If you’d prefer more freedom, buying a van outright might be more suitable 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 with hire purchase, personal contract purchase or a personal loan.

But if you‘d like the flexibility to drive a brand-new van every 2 or 3 years, leasing could be the better option. It could also suit you if you don’t want the added responsibility of owning a van.

Find out which are the best vans to buy or what you need to know if you’re thinking about buying a second-hand van.

Van lease with insurance 

Some van leasing agreements come with a built-in van insurance policy. But you should look at the wording of the policy to check what you’re actually covered for.

If your agreement doesn’t come with insurance, it’s worth comparing van insurance policies. Check that the policy covers you for however long you plan to use the van.

There's also the option of choosing temporary van insurance for short-term cover while you're leasing the van. This option can give you a short-term, comprehensive insurance policy for between 1 hour and 28 days.

If you’re concerned about the cost of van insurance, here are some tips to keep your van insurance costs down.

Compare temporary van insurance quotes

Will buying a van reduce my tax bill?

Yes, it could. If you buy a van for your business, you could offset the cost against the amount you pay income tax on.

This is either as a capital allowance if you use traditional accounting or using the simpler cash basis system.

These let you deduct all or some of the van’s value from your profits so you pay income tax on less.