As a sole trader or small business relying on a van (or fleet of vans) for your livelihood, a major decision you’ll need to make is whether to buy a van or lease one. Let’s look at the arguments on each side.
Buying a van
When you buy a van, the biggest advantage is that it’s yours to do what you like with. You can customise it to your heart’s content, and you won’t be bound by any mileage restrictions. You won’t have monthly payments to worry about, which means you’ll have more monthly budget free to invest in other areas of your business.
The downside to van ownership is that you’ll need a big sum of money upfront, which can be difficult to find when you’re just starting out. However, you’ll be able to offset the cost of your new van against your tax, as it’s a legitimate business expense. Arguably a bigger consideration is depreciation. Because vans, like cars, are an asset that depreciates rapidly, your investment will lose a significant amount of its value within the first three years, which will have an effect on your balance sheet.
As your vehicle gets older it will also become more costly to repair, particularly once its warranty runs out. What’s more, when you want to replace your van with a new one, you’ll have to deal with the hassle and potential delays of finding a buyer.
Leasing a van
A major advantage of leasing a van is that you can keep changing it every two or three years, meaning you’ll always enjoy the advantages of a new vehicle. When your lease is up, you won’t have to worry about selling it; you simply hand back the keys or exchange it for a new one.
The cost of your van will be spread over monthly payments, which is handy if you’re just starting out and don’t have a big chunk of money to invest. You’ll know in advance how much the monthly payments will be, which keeps budgeting simple, and you won’t have to worry about depreciation. What’s more, you’ll have the option of a hassle-free maintenance programme to keep your vehicle in tip-top condition.
There are downsides to leasing that you’ll need to bear in mind. Before you can take out a lease agreement, you’ll (and/or your business) will be subject to stringent credit checks to ensure you can afford the monthly payments, so if you have a poor credit rating you may struggle to secure a van lease. You’ll be limited on the customisation you can do to the vehicle, as it doesn’t belong to you. You’re likely to be limited on the mileage you can do each year, and at the end of the contract you’ll have to pay for any mileage you do over the agreed amount. You’ll also have to pay for any damage deemed beyond the company’s definition of ‘normal wear and tear’.
As you can see, there are pros and cons to both van leasing and ownership, and the option you end up going for will depend largely on your own circumstances. Don’t forget that you’ll also need to take out van insurance to protect your investment from the unexpected, whether you’re the owner or just leasing. Contact our A-Plan van insurance experts to find out more.