Published on Thursday 18 February 2016 in Van News
Your van is one of the biggest investments in your business and has huge potential to increase your profits. Are you maximising the amount of money you could be saving by the way you finance your vehicles?
Leasing over purchasing is one way to do this. You'll reduce your running costs and avoid having to pay a large sum of money upfront to get your van. This will help you to keep more money in your business and eliminate the likelihood of having to take out a loan to purchase your vehicle.
Vehicle financing is the most popular way to get a new vehicle
Figures from the Finance and Leasing Association show that more than 75% of new vehicle sales in the UK are bought on finance. The way we purchase items is changing. You may already pay monthly for either your mobile phone, gym membership or perhaps a subscription to watch films on Netflix. Now more people are considering paying monthly for their vehicles by leasing them.
How much cheaper is it to lease a new van than buying used?
We compared a used two year old Ford Transit Custom 2.2 TDCi 270 panel van on hire purchase from AutoTrader, to leasing the same vehicle, but brand-new with Vanarama. Over a two year period, you'd save in excess of £9,000! Below is a breakdown of the figures, to show you how this is possible:
What are the main advantages of leasing your van?
- The monthly payments are fixed, so you know exactly how much you have to pay, making budgeting easier for you
- You can focus on your business instead of vehicle maintenance, as with leasing agreements you're able to include servicing and maintenance for your van
- You don't need to worry about selling your van or it losing money due to depreciation with a Contract Hire lease
- You can get another brand-new van once your existing contract comes to an end
- You'll receive a warranty with your new vehicle
- Road tax is included for the duration of your lease with Business Contract Hire and for the first 12 months with a Finance Lease
- Maintenance, deposit and repayment costs are generally lower than if you purchased the same van second-hand with a loan
- Frees up more capital for you to invest in your business
More financial benefits to keep your accountant happy
If you decide to lease a van on Business Contract Hire, you'll gain from additional reimbursements. You can reclaim up to 100% of the VAT on all maintenance charges and lease rentals. You're also entitled to claim up to the full amount you paid for rentals against corporation tax.
Your vehicle can even appear off your balance sheet when you choose Business Contract Hire, as it's owned by the finance company. You benefit from being able to use the van and the responsibility of ownership lies with the financial organisation. They're accountable for the buying and selling of your van, so you won't need to get involved with this, unless you have a Finance Lease agreement. Once your vehicle comes to the end of the contract term, you can upgrade to a brand-new model. It's yours to drive away and you can start using it for work immediately.
To buy, or not to buy?
Whether you decide to purchase or lease your van will depend upon your personal circumstances and your preferences. If the points above appeal to you, then leasing would suit you. If you want complete ownership of a vehicle and are happy to keep it for a longer period of time, a purchase agreement would be more appropriate.
After your property, your vehicle is likely to be your second largest investment. Both are different though. You expect your house to increase in price and accept that your vehicle will lose value.
Billionaire oil tycoon J.Paul Getty said: "If it appreciates, buy it. If it depreciates it, lease it." This is one of the main advantages of van leasing, as you won't lose out due to your vehicle decreasing in worth.
What other ways can a new van save you money?
The servicing and maintenance costs of a new van will be lower than if you'd bought a used one. Each new vehicle comes with a manufacturers' warranty and will not require a service for the first 12 months.
When leasing you have the option to include a service and maintenance package. This covers you for all vehicle servicing, spare parts, puncture repairs and tyres. This will keep your costs as low as possible and avoid any shocks of having to pay out expensive mechanical bills.
Get the van you want and the right one for your business
With a new van you'll benefit from advances in fuel efficiency and your vehicle has the capability to be stocked with the latest vehicle technology. You can choose which specification you want and what features you wish to include.
Protecting you and your van
If you decide to lease there are a number of important factors to consider. Make sure you use a company who is a member of the British Vehicle Rental and Leasing Association (BVRLA). This will give you peace of mind that you're using a trusted and reputable broker.
All leased vans on Contract Hire will be checked for wear and tear on return and any excessive deterioration to the vehicle will result in a charge. By selecting a company connected to the BVRLA, you're ensuring that the standards of wear and tear are determined by the trade association, and not the broker. This means that your vehicle will be examined in a fair manner and you'll not be charged for any insubstantial reasons.
Peace of mind with financial fair play
It's worth being aware if the company you intend to use is regulated by the Financial Conduct Authority (FCA). They ensure financial firms provide services which maintain the integrity of the UK's financial markets and they operate independently from the government.
The FCA's focus is to regulate the conduct of both retail and wholesale companies in financial services. They have the ability to specify minimum standards for products and services and the power to investigate organisations and individuals.
Calculate how much your new van will be to run
You can work out the amount it'll cost to operate your van by using the Vanarama Running Costs Calculator. It'll help you to budget by giving you the estimated cost per mile for your van, including fuel costs based on the last month's national average price per litre. Apart from your insurance, you'll have an accurate figure of what it'll cost to run your new van.
Are you thinking of getting a new van or are you happy with buying used? Please let us know below. Alternatively, if you need any more information about your next vehicle, you can call us on 01442 835 769.