Should You Buy or Lease a Van?
If it’s time to get a new vehicle for your business, you’ll probably need to decide whether to buy or lease a van. There are pros and cons to both, and our guide will help you decide what might work best for you.
Let’s face it, whether you buy or lease a van, it’s a significant investment and it can be a daunting prospect, particularly if cash flow is tight. Considering whether you should buy or lease the van is just one of the many choices to consider, but it should be one of the first decisions to make as it will impact your budget and what models you can choose.
The difference between buying or leasing a van
To break it down, the difference between buying or leasing is simple:
- Purchasing the van means that you have bought the vehicle upfront, and it automatically becomes an asset for you or your business.
- When leasing a van, you will pay monthly instalments to keep the van in your possession. Depending on the finance model, you’ll have to give the van back at the end of your contract but if you fail to keep up the payments, it could end up heading back to the company who leased it to you much sooner.
The leasing period is typically two to three years. The vehicle will not technically be yours during this time as you do not own it outright. However, it remains in your possession, and you will get to use it as much as you want for the length of your lease.
What are the advantages of buying a van?
You will pay for the vehicle outright, so the cash flow of your business is not affected over a prolonged period, and you don’t have to worry about monthly instalments.
Buying outright tends to be the cheaper option when compared to the overall cost over the leasing period. You might even be able to negotiate a lower price if you can pay in cash, or if you already own a van you might be able to part exchange it for a newer model.
Once the van is purchased, you have no more additional purchase payments to consider.
The van will be a personal or business asset and you have the freedom to do what you want with it – for example, personalising the van, branding it or modifying it to suit your hobby or business. And of course, you can sell the vehicle should you no longer require it.
Of course, when you buy a van, there is no mileage limit and no additional charges for high mileage. If you plan to use the van for long distances, buying may be a better option than leasing.
If you want to acquire a van, the next step is to look at vehicles available to purchase.
Disadvantages of buying a van versus leasing
As with any major purchase, there are disadvantages. Having all the money to pay upfront might not be possible for an individual or business. Buying a second-hand van could be a cheaper option but do your research and make sure the van is sound before making the purchase.
You also need to consider the depreciation of the van; as soon as a van is driven on the roads, its value decreases and of course, you will need to invest more in vehicle maintenance. The amount you spend on the van while you own it could be more than the vehicle is worth when you come to sell it.
The advantages of leasing a van
When considering whether to buy or lease a van, it’s probably obvious that leasing is the more immediately affordable option for most people, often making cash flow easier to manage. Payments can be monthly and will be consistent, so you can plan and manage your finances better.
The quality of the vehicle might vary considerably depending on whether you buy or lease a van. When leasing, the vehicle will be new, you don’t need to worry about buying second-hand vans and a smart new van is a good look for your business.
You won’t need to worry about depreciation when leasing; the van is not your own asset and at the end of the lease period, you can just give the vehicle back without having to worry about selling or disposing of it. If you want, you can then begin your next lease period.
Increased flexibility, lower maintenance, and less responsibility for the vehicle are all key factors to consider when you buy or lease a van, all of which are advantages of leasing.
Leasing may also deliver tax benefits, as monthly payments can be paid back as a tax-deductible expense if your business is VAT registered. In addition, some lease packages can include perks, such as breakdown cover, which typically isn’t offered when buying a van outright.
What are the disadvantages of leasing a van?
Essentially, you will be spending money on something you do not own. When leasing, the vehicle is not your asset and therefore, you cannot sell the van to make money back. Although this may be a more practical option financially, you must consider the long-term effect of investing money into a vehicle that will not be an asset.
If you exceed your mileage limit you might incur additional costs. You will need to calculate how many miles you are likely to drive during your lease. Plus, if you damage the van, you may face more charges although obviously, you should ensure that you have the best insurance cover for your circumstances.
To lease a van, you need a good credit history, so check out your credit score before making the decision about leasing or buying.
Another disadvantage is that making major modifications to the van is not likely to be possible. So, if you need to adapt the van for your business or hobby, or want to brand it, leasing might not be for you.
Is there an alternative?
‘Lease to buy’ is another option which means at the end of your lease, you can choose to purchase and keep the van.
If buying a van upfront is proving difficult, van finance could be another option. This could be with a personal loan, hire purchase or personal contract purchase.
So, should you buy or lease a van?
Overall, finances will be the main deciding factor when buying or leasing a van. Other important questions to answer include
- Is the van for your business or for personal use?
- How long will you want to use the van?
- How many miles do you plan to drive?
- What are your credit score and cash flow situation?
- Do you need to modify or brand the van?
Whether you lease or buy the van, you’ll need to organise insurance, think about maintenance and make sure you have a safe place to park the vehicle. There’s no single right answer to the question of whether you should buy or lease a van, it depends on a variety of factors for each individual but there is likely to be a clear decision once you have done your research and considered all the options.
GET A QUOTE
Compare van insurance from the top UK brokers now!Get a quote