Business van lease
Over the recent years, van leasing for business use has experienced a significant surge in popularity in the UK. This growth can be attributed to several benefits that leasing offers. Not only does it allow you to drive a brand-new van and enjoy the latest technology but you can do that without incurring high upfront costs and risks associated with ownership.
Leasing a van is a great choice for businesses of all sizes, from small operations to multinational organisations requiring a substantial fleet.
How does van leasing work in the UK?
Business lease involves entering into a long-term (usually two to five years) rental agreement for the exclusive use of a van or pick-up truck. To start, you need to select the van that suits your needs and budget. Then, you choose a lease term that includes the initial rental (deposit), lease contract length, annual mileage allowance, and optional vehicle maintenance. After agreeing to the terms and signing the contract, you get your new van delivered to your chosen location. Following the delivery, you start making fixed monthly payments for the duration of your agreement. At the end of your contract, you normally give the van back to the finance company, however, some lease agreements allow you to purchase the vehicle. Please visit our 'Van leasing explained' blog for more information.
Benefits of leasing a van for business use
When leasing a business van, you can enjoy many benefits compared to buying it outright.
Low upfront cost: By opting to lease, you get the latest van without the hefty upfront costs associated with buying a new vehicle. You can start driving a brand new van with just a small deposit (initial rental). The deposit can be as little as the equivalent of one month's rental.
Affordability: Leased vans are often more economically viable due to their lower initial costs and the payment structure based on vehicle usage rather than the full value of the vehicle. Leasing is also a great way to get a new van with the latest technology and safety kit you might otherwise not be able to afford.
New van every few years: Van hire agreements last two to five years, and at the end of the contract, you get to upgrade to a new vehicle without losing money like when you sell one.
Fixed monthly payments: With a lease, you pay a fixed monthly fee, making budgeting and cash flow management much easier.
No depreciation worries: When you buy the van, it loses its value as soon as you start driving it. When you want to sell, you might find it's worth less than you thought. With leasing, you don't have to worry about that. Depreciation is included in your monthly payment, and if the vehicle ends up worth less than anticipated, your funder takes that risk, not you.
No selling hassle: When you're ready to upgrade, you simply return the van to the funder. There is no advertising, no visiting dealerships, no negotiating with buyers.
No mechanic bills: The manufacturer's warranty, which is at least three years, comes standard on all new lease vans and covers all mechanical faults. This means that you'll only have to worry about routine servicing and maintenance. However, if you opt for a vehicle maintenance package, these will also be covered.
Road tax included: Vehicle tax is included in your lease payments.
Tax benefits: Unlike purchasing a van outright, where VAT is paid upfront, leasing allows you to reclaim a portion of the VAT on your monthly payments. This can result in significant cost savings for your business, as you can effectively reduce your VAT liability. Additionally, since leasing is considered an operating expense rather than a capital expenditure, you can claim the VAT back on the entire lease cost, including maintenance.
The incredible benefits of leasing make it unsurprising that an increasing number of business owners are turning to leasing as a hassle-free and economical way to access the van they need for their operations.
To get a more comprehensive analysis of the benefits and drawbacks of both purchasing and leasing a van for your business, we suggest reading our blog post 'Should you buy or lease a van for your business?'.
What types of van lease agreements are available?
When you lease a van for business use, there are various lease options available. Our leasing experts can help you make the right choice for your needs.
Business Contract Hire
Business Contract Hire or Van Contract Hire (BCH) is a type of agreement similar to Personal Contract Hire (PCH) but intended for businesses rather than private individuals. It works in the same way though. You can choose the initial rental, annual mileage, and contract length. Then, you will make fixed monthly payments throughout the duration of the contract. Once the agreement comes to an end and you have completed all the payments, you will return the vehicle with no remaining payments. BCH is a popular choice for businesses that prefer to update their fleet regularly or avoid capital investment.
Finance Lease is exclusively designed for businesses and is not accessible to individuals for personal leasing. When opting for a Finance Lease, you choose the initial rental (deposit), agree upon the mileage and contract duration, and proceed with monthly payments throughout the lease period. At the end of the lease, the vehicle must be sold to a third party. You can do that yourself or ask the funder to sell it on your behalf for a small fee. The funds from the sale proceeds have to be used to pay the predetermined balloon payment. Finance Lease payments are generally lower than with a BCH due to the shared depreciation risk. If the funds from the vehicle sale fall short of covering the balloon payment, you will need to make up the difference. Conversely, if you sell the vehicle for a higher price, you get to keep the surplus amount.
Business Hire Purchase
Business Hire Purchase is a form of van financing that allows you to obtain a commercial vehicle through a series of installment payments. You will be required to make an initial down payment and continue with regular monthly installments. Additionally, unlike Business Contract Hire and Finance Lease, you are responsible for paying the full value of VAT upfront rather than spreading it across monthly payments. Upon successfully completing all payments, ownership of the van transfers to you. This financing option offers flexibility and the chance to utilise the van for business purposes while moving towards full ownership.
Business Contract Purchase (BCP)
BCP is a van finance agreement where your company pays monthly installments for a fixed term and has the option to purchase the vehicle. After paying the pre-agreed balloon payment at the end of the contract, you gain ownership of the van. However, it's important to note that when choosing a Business Contract Purchase, you must pay the entire VAT upfront.
Van Contract Purchase often has lower payments compared to Hire Purchase or lease agreements due to the balloon payment at the end. If you are unable or choose not to make the balloon payment, you can return the vehicle. Ownership is transferred to you only once the final payment is made.
Business Lease Purchase (BLP)
For businesses that are not VAT registered and wish to avoid significant upfront costs associated with vehicle ownership, Van Lease Purchase is a suitable option. You pay the monthly installments as with any other product. To finalise the purchase of the vehicle, you need to make a final "installment payment". This payment is a lump sum due at the end of the lease term. It's important to note that vehicle maintenance is not included in the Van Lease Purchase agreement, as this product solely focuses on van financing.
New business van leasing
Vehicle leasing always involves conducting a credit check. Because of that, many leasing companies are unable to lease vehicles to newly incorporated limited companies or sole traders that may have limited or no established credit history. Our goal as business van leasing specialists is to get you on the road with an affordable van, regardless of whether you're a new or existing business.
As a start-up business, you may be required to provide additional information. In certain cases, you might also be asked to provide a 'director's guarantee', wherein you, as a director, assume personal responsibility for the lease payments in the event that the business is unable to pay.
Looking to lease a van? Find the right van lease deal with us!
Due to our well-established relationships with commercial vehicle manufacturers, dealerships, and reliable funding partners, we have the ability to provide cheap vans to British businesses like yours. Whether you're a sole trader, a small business, or a large ltd company, we can help you find and finance the right van for your business operations. So why wait? Browse our wide range of van lease deals and find the perfect van lease for your needs today!