Should you really buy a van?
Your business van is one of your most important assets, so it's important that you know what your options are before you invest.
At the most basic level, there are two ways of getting a van: buy it outright or lease it for a set period of time.
The best choice for your business may not be purely down to finance. You need to understand the pros and cons of each approach, so here’s a quick guide.
What's the difference?
Buying a van is, of course, just like it sounds: find a van, find a way to pay for it, and it's all yours.
Leasing, on the other hand, is effectively a long-term hire. You'll pay a fixed cost each month and have a van to use, but it's never fully yours.
Should you buy a van?
You may find getting a lump sum together daunting. But owning your own van comes with a number of benefits:
- You can do what you want with it - add your company logo to the side, fit the specific storage units you need, and be sure you're getting
the right van insurance for your needs
- You can claim part of the purchase price as a capital allowance, meaning you could have less income tax to pay
- If you're paying in cash and you've got some decent haggling skills, you might be able to get a better deal than you would with a lease
- If times get tough and you need a quick injection of cash, you'll at least have the option of selling your van and replacing it with a cheaper one
Unfortunately, buying a van comes with its downsides, too:
- Full ownership means full responsibility. You'll have to manage the costs of
your vans MOT
, road tax, maintenance, repair and depreciation
- You'll have to get the money together. It could mean taking a big chunk out of your capital, or paying undesirable interest rates on a bank loan
Or should you lease?
If you're not sure whether buying is the right choice, have a look at some leasing packages. You could benefit from:
- A healthy cash flow. You won't need to hand over a huge amount of money at once, and you'll probably find that breakdown cover and maintenance costs are included in the deal.
- Flexibility. You can get extra vans to fuel your business expansion without worrying about being stuck with them for years if business drops off. You could also be sure you're driving a nearly-new van every single year
- The option to eventually own it anyway. With some leasing arrangements, you'll get the option to buy the van at the end of the term at a reduced price
But, of course, leasing has its own negatives. You'll also have to consider:
- The restrictions of the contract. Most leasing agreements specify a mileage limit, so you could face substantial charges if you drive a lot
- Being stuck in an agreement. Your business needs might change over time, and you won't be able to sell off your leased van like you would if you had bought one
- Eventually paying more. While the smaller up-front cost is certainly attractive, over a few years you'll probably find that the total cost is higher
As you can see, there's no ‘one-size-fits-all’ approach. If you've got the cash and can handle the risks, it's often more cost effective in the long run to buy a van. But if you're just starting up or your finances are tight, you might be better off going for the flexibility and manageable payments of a lease.