How Does Leasing a Van Work?
Can you lease a van with bad credit?
Can you sign-write a leased van?
The pros and cons of leasing a van
How much does it cost to lease a van?
What is van leasing?
If you are a small business owner who needs to use a van every day for business, it is easy to slip into the belief that you need to buy a van. After all, it stands to reason – need a van, buy a van.
Your van is old now, you drive out and get passed by people in shiny Transits, gleaming Transporters and polished Vitos, all looking like they have less than 20,000 miles on the clock and you just wonder how they manage it.
The answer is – they lease.
Van leasing is a cost-effective and affordable way to get a brand-new van without having the capital to just splash out and get one. Not only that, but it also offers ways to deal with all the maintenance issues of a van, from servicing to tyres.
How van leasing works
It’s hard to have the capital to buy a van out of the showroom. It’s not like you need convincing that a new van is better than the one you currently have with 250,000 miles behind it, but stumping up that kind of cash is difficult – even if the bank would lend you the money based on your strong business model, it would leave you tied up for years without being able to invest in any other part of the company and possibly, stagnate business growth as a consequence.
Van leasing works with a simple monthly payment. There’s a larger first payment, usually equal to three to six times a standard month, but then it’s just one payment a month until the end of the lease. At that point – just like a mobile phone contract – you can upgrade to the latest model and have a new contract!
If you choose the additional maintenance packages to cover servicing and other issues, then it’s a little more per month but you don’t have to worry about anything ever! No sudden surprises to hammer the bank account just when you are down, no worrying about servicing and no putting aside money once a year for potentially crippling MOT costs. In fact, with a new vehicle under three years old, there isn’t even a need for an MOT!
That’s it – pick a van with an affordable monthly lease cost, pay the first month’s initial rental payment and get on the road knowing exactly how much you have to budget every month.
Is leasing a van a good idea?
Owning your vehicle means you are responsible for every aspect of it. Not only do you have to look after it, get it repaired when something goes wrong, replace tyres when you hit a bad pothole and pay for every click, squeak and crack along the way, but you are hit with the devastating devaluation that is depreciation - 20% of your vehicle value is lost each year for the first three, and it continues dropping until eventually, you are pushing something around that’s worth a lot less than its annual insurance premium.
Leasing is so cost-effective, it’s typically cheaper than the depreciation alone! Look at the following example:
A basic Citroën Berlingo costs approximately £15,000 to buy brand-new. Leased, it comes in at £175 per month, with an initial payment of six times the monthly value (£1050). Over three years, you’ve spent a total of £7,175 through leasing.
If you bought the same van for £15,000, it would have a resale value after three years of around £6,000 – that’s a drop of £9,000.
Sure – of course you own the van and can keep driving it, but then you’re back to driving around an older vehicle that has been working hard for a few years. With the lease, you can upgrade to a brand-new van effortlessly – plus, if your business has grown and you need a bigger or better model, that’s no problem.
And that’s without all the other advantages of leasing! The lack of worry with having a fixed budget and the ongoing support from the leasing company, for example, are major benefits for you.
The tax advantages of leasing a van
Leasing a vehicle is something you can offset against your yearly tax bill. Not only that, but if you are VAT registered then you can offset 100% of the VAT. That’s a huge saving!
Also, by leasing your van rather than buying it outright, you keep your capital untouched and your credit options open. Why not read our article on the tax advantages of leasing to find out more?
Length of term – considering short-term van leasing
Sometimes, of course, especially if you are sole trader looking at van leasing for the first time, you don’t want to get tied into a three-year contract.
While traditional business contract hire (BCH) is typically for leasing with three to five year terms, at Complete Leasing we also work with dealerships to provide short-term leasing for van leases between six months and two years.
With less tied up, you can afford to see what works for you and it’s easy to extend your contract to a longer business leasing deal if you want – or to simply drop it and walk away!
Read our short guide Short-Term Van Leasing to find out more.
Can you lease a van with bad credit?
Let’s be honest – the better your credit rating is, the better it’s going to go for you when trying to lease your van. However, we know that the self-employed may have only been in business for a short time and you might not have had time to build up a solid credit score.
With many options available, from looking at personal contract hire (PCH) over business hire (if your business is very new), or even specialist van leasing for new limited companies, at Complete Leasing we can work out a way to get you the vehicle you need.
What about sign-writing a van? Can you change the van in any way?
Leasing companies understand that getting the right livery on your van is important and are very understanding of small businesses that need to make the most out of that advertising space by adding stickers or even adding a full vinyl wrap to their van.
It’s a great way to boost your exposure and isn’t a problem under most lease contracts. For more detail about sign-writing your van, read our article Can I Put a Logo on My Leased Van?
Leasing a van pros and cons – it can’t all be upside
There are advantages and disadvantages to everything. Here are a few bonuses and issues with van leasing in addition to the financial advantages:
Pro: Easy budgeting
Having one standard monthly payment and no surprises can be the difference between the smooth operation of your business and a sudden hiccup that costs you time and customers. The clear plan of financial expenditure is another huge bonus for business leasing.
Pro: Making a good impression
Turning up to an important client in a battered old van is never going to impress. By having a brand-new van at your disposal, you show then that you are serious with your business and successful with it.
Pro: The best feelings that come from a brand-new vehicle
From that great new-vehicle smell to up-to-date GPS and electronic safety systems, there’s a lot to be said from driving a brand-new van. It’s reliable, comfortable and can even brighten up your day just knowing you get to spend time in it!
Now you can be the person other drivers are envying on the road!
Con: Limited mileage
When you lease a vehicle, it’s very important that you accurately estimate your annual mileage. Many leasing contracts are for 10,000 miles a year as a standard and if you think your business needs are going to outstretch that limit, you need to think about that from the outset.
The number of miles that the vehicle has done has a major impact to its depreciation and the final amount it is worth when it’s returned to the dealership at the end of the contract is important to the finance company. To mitigate their financial risk, you will be penalised for every mile you do over the agreed amount.
Typically, this penalty is approximately ten pence per mile – that’s a £10 fee on 100 extra miles, and as much as a £1,000 penalty if you go over by 10,000.
Limiting your mileage when you find yourself getting close to the mark may affect your business so avoid this by planning in advance. Of course, you can always call and update your estimate at a later date if you find yourself doing a lot more (or a lot less) driving than you expected. Bear in mind that it’ll have a knock-on effect on your monthly costs though.
Con: Excess damage
Just like additional mileage comes with a penalty, so too does damage to the vehicle itself. A van can go through a lot in three years of constant business use, so it’s no surprise that often, leased vehicles pick up an extra string of minor charges at the end of the lease.
If you believe that you might damage the van more than is reasonable, or that you need to do a lot of extra miles, however, then finance lease may be a better option than a standard business contract hire deal. For information on finance lease, give us a call or read our guide Finance Lease Explained.
Van leasing and insurance
Making sure you have the right insurance is imperative for all drivers on UK roads. Unlike other costs, such as vehicle excise duty (road tax) that is paid as part of your lease contract, the burden of insurance falls squarely on your shoulders, even with a leased vehicle.
You will need fully comprehensive business insurance in the very least – and remember if you are a courier or otherwise use your van extensively in the business then you will need class three business use insurance.
And don’t forget to make sure anything left in the van overnight is secure, and that it’s parked in a safe location!
How much does it cost to lease a van though Complete Leasing?
Depending on the size of your van, we have deals that start from as little as £150 per month, with larger vans, such as the Ford Transit, starting at around £200.
Whatever your needs, we are bound to be able to find the right vehicle for you. We work with a network of dealers and leasing companies across the UK and are always on the look-out for the very best deals in both business and personal leasing.
For cheap van leasing, give us at Complete Leasing a call today or fill in our contact form to have one of our specialists get back to you at a convenient time.
