Unless you plan on keeping your van for the next 20 years, you should be looking carefully at the pros and cons of leasing compared with purchasing outright.
Buying Second-Hand Vans
Although many people will choose to purchase a cheaper second-hand model, the costs of repairs and maintenance add up very quickly, so although you may have saved yourself initially on the upfront cost, over the period that you own the vehicle how much are you really paying? https://www.moneyadviceservice.org.uk/en/tools/car-costs-calculator
If you have had to borrow money in order to meet the purchase price then you are losing on all counts. The interest you are paying is unlikely to be offsetting the depreciation of the van, and your asset is losing value every day.
Buying A Brand New Van
So, another option is to buy brand new, with a warranty still intact. This means that if anything mechanical happens to the vehicle you are not wearing the cost. The cost of purchasing a new vehicle can be prohibitively high for many people, particularly new businesses with low turnover, so taking out a loan becomes an incredibly viable option.
The upside to borrowing money to purchase any asset is that the cost of the interest is an easy write-off against your income. The downside is that you actually have to come up with relatively high payments each month to meet your financial obligation.
If you keep the car for a few years after you have paid it off, then it may be a financially viable option, with the interest, purchase price and depreciation all being able to be used to offset your tax obligation. However, if you hold on to your van for too long you will quickly reach the stage where it is needing standard repairs and maintenance, and from there on in you are back to losing money on it.
What about leasing a van?
Many people baulk at the idea of leasing, because there is the mentality that you don’t own it, that you are not building up your asset portfolio. Which in many ways is rather accurate. However, with select vehicle leasing the price of leasing a vehicle is significantly less than the repayments if you were to buy the same brand new model.
There are several advantages to leasing over buying, but the first big one is obviously going to be a smaller weekly outlay. Unless the business is in a position to purchase a brand new vehicle outright, there will be loans and interest costs to consider. With leasing there is just the standard monthly, or weekly, payment to the leasing company.
With most leasing companies you are not liable if your van breaks down. In fact if you read the fine print in your policy you will likely find that in the even of your van suffering mechanical failure that the lease company will replace it, or at least give you an excellent loan vehicle while yours is being repaired.
One your lease period is up you will have several options, but by far the most popular is to simply lease the newest model and carry on. In this way you will always have the most efficient fleet, with the latest technology. This means that you are not only going to be saving money by having a far more fuel-efficient fleet than if you had purchased something 15 years old, but how much more efficient will your business be? Blue tooth in cars revolutionized freight and delivery businesses, and the technology in vehicles just keeps improving in each and every new release.
Pitfalls of Leasing
With leasing you will obviously not own the vehicle, but many people think that if they like the vehicle enough they will be able to buy it cheaply at the end of the lease period. As a general rule, this is not the case. Many lease contracts have a clause stating that the vehicle must be sold at the end of the lease period, with a percentage going to the finance company.
Most companies will have a limit on the number of miles that a vehicle can travel (see here), with penalties if you go over this. So be sure to estimate well about how far you will be travelling, and try to keep an eye on it.
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