If you are setting up a business that requires the use of a van, such as a mobile mechanic or delivery driver, or you need to upgrade from an older vehicle, you have the option of leasing or buying. Which is the best option for your trade? We look at the pros and cons, including costs, mileage restrictions and getting the right van insurance.
For any new business owner relying upon a vehicle to carry out their trade, the biggest decision to buy or lease a van will often depend on how much money you have. When you’re just starting out, money can be tight and financing options maybe restricted, especially at this time during a pandemic.
There might be other considerations too such as how long you’re likely to use the van for and what you’re going to be doing with it. It could form a part of your business such as a mobile windscreen fitter or dog grooming business or it could simply be a mode of transport for goods such as a courier.
If you’re working in construction, for example, it’s unlikely that you’ll want to lease a van, given the high risk of damage when on-site and the high prices that you’ll have to pay for repairs. Equally, if you just want a bigger or smaller van to complete a specific job, you’re unlikely to buy one outright.
Buying Your Van
Buying your own van with your own money is the most economical way of running a van long-term but that depends on your access to finance if you don’t have the ready cash available. The total cost of purchasing is likely to be lower than leasing. It also means that you can haggle on the price to get the model you want, maybe even trade in an older vehicle and own the van for as long as you need it.
Purchasing your own vehicle means there are no restrictions on distance or mileage, and you can customise your van with useful additions inside and out (but see our previous blog on additions and the van insurance implications). However, you’ll have to pay for maintenance, tax and insurance yourself.
Although your van becomes a valuable asset on your balance sheet, you’ll also have to take account of the depreciation of your van’s value over the time that you own it.
Leasing Your Van
Leasing your van is a straightforward option if you don’t have the ready funds to buy one outright. Although you’re often tied to a fixed-term contract, say three or five years, it can be a convenient method of safeguarding your initial business investment to focus on other areas of your business such as purchasing essential equipment.
No large down payment is required when taking out a van lease and monthly payments are fixed to help your budgeting. Remember that you won’t own the van at the end of the lease although there are many finance options which now offer that choice. If you do want to buy the van at the end of the lease, you must pay a quite an amount as a final payment at the end of the lease period.
Leases can often be complicated with a whole host of onerous terms and conditions. However, the reality means that you don’t own the van and you’ll be paying the same amount on the lease every month, which is perfect when you’re budgeting.
Most leases come with fixed maintenance and breakdown packages. Full-service leases are available which often include maintenance, repair, accident management, insurance and registration. Once the contract finishes, you simply return the van and can get a new one. Or after three to five years you could simply upgrade your van to a newer model.
If you choose to lease your van, you can save on maintenance costs down the line as a warranty usually covers repairs. But some leases do have mileage restrictions and a whole host of other clauses and administration fees. If you need to stop the lease early, you could be left out of pocket.
Also, be cautious when looking at the van insurance policy. Many leases don’t include insurance and you will have to organise it yourself. If insurance is provided, you must check that it is suitable for your business needs and offers extra coverage for tools, commercial liability, and goods in transit insurance. When taking on a van lease, it is advisable to talk with an independent broker to ensure that you are covered for all your business risks and not just your van insurance.