Should you buy or lease your van?

So, you’re in need of a new van. You might be in the final stages of setting up a business that requires the use of a van, for instance, if you’re going to be working as a tradesperson or delivery driver. Or maybe you’ve had your own business for many years, but your current van is on its way out and you need to upgrade.
 
Whatever type of van you drive, Insurance Factory can find you van insurance loaded with benefits, for a competitive price. We work with a leading panel of specialist insurers, offering policies that are tailored exactly to your unique business requirements.
 

To buy, or not to buy?

If you’re in the market for a van, there’s one big decision you’ll need to make: to buy or not to buy? Buying your van means you take full ownership of the vehicle, and will either pay for it outright or by taking out a loan. With leasing, you never truly own the van – you effectively pay a monthly fee to use it. That is, unless you opt for a leasing scheme where you can pay a lump sum at the end of the agreement to purchase the van outright.
 
According to figures from industry association BVRLA cited by SmallBusiness.co.uk, one in eight cars and one in five vans on Britain’s roads are leased. Last year, 1.9 million corporate cars and 619,925 light goods vans were under leasing arrangements.
 
Each option has its pros and cons, so we thought it would be useful to take a look at what they are to help you make the best decision for you and your business.
 

Buying a van – pros and cons

Ownership

As a Toomey Leasing Group blog explains, buying a van outright means you take full ownership of it; it becomes a business asset. You have more freedom when it comes to negotiating the price you pay for the van, plus, you stand to make money if you decide to sell it on further down the line. 
 
Owning the van, rather than leasing it, also grants you more freedom – you can make modifications, and trade it in or sell it whenever you want. You’re also not tied into an agreement period, as you are with leasing.
 

Mileage restrictions

When you buy a van, you don’t have any mileage restrictions. On the other hand, when you lease, you have to set your mileage from the start of your agreement, and you could face a hefty per-mile fee for going over that allowance.
 
Of course, it can be difficult to estimate how far you’re going to be driving if your business is new or you’re constantly taking on new customers. So in this sense, purchasing a van can be a better option if you don’t want to be tied to mileage limits.
 
Remember, you’ll probably have to state your estimated mileage when you take out van insurance. It’s really important you’re as accurate as possible when doing this, so that you get the right level of cover.
 

Costs

Buying a van outright requires more initial capital investment, but you won’t need to make ongoing monthly payments – unless you take out finance to buy it.
 
If you’re planning on purchasing a new van, you need to think about depreciation. For instance, the AA says that a car will lose around 40% of its value within a year once its left the forecourt, and half its value within three years.
 
As Hippo Leasing notes, while buying a van is likely to save you money in the long term, you need to bear in mind that maintenance costs are likely to increase as the vehicle ages. The flipside to that is that insurance premiums can drop with the value of the vehicle, so you might make some money back in this sense.
 

Leasing – pros and cons

Costs

Loads of Vans writes that with leasing, you pay a deposit followed by a fixed monthly fee for a set period of time, usually between 24 and 60 months. This can help with budgeting, owing to the fixed monthly cost and the fact that the outright cost of the van is removed from your business’ books.
 
The cost of leasing payments is also allowable against tax, unlike owning the van, so you won’t be losing out here.
 

Servicing and maintenance

While leasing agreements vary between providers, many allow you to add servicing and maintenance to the monthly package, meaning you’ll avoid any unexpected costs. Leasing also often includes full manufacturer’s warranty cover, which usually lasts between two and five years.
 

Flexibility

While nowhere near as flexible as purchasing a van outright, some leasing agreements now offer some degree of flexibility once you reach the end of the contract. For instance, they give you the choice of buying the van, refinancing or handing it back.
 
Mileage is obviously a restriction when it comes to leasing – and the more miles you do, the more your fixed monthly payment will be. And if like most business owners you want to add signage to your van, most leasing contracts require the signage to be completely removed before you hand it back, which will cost you.
 

So, which option is best for you?

Ultimately, there is no best option – it’s whatever works best for you. You need to take some time to sit down and consider the pros and cons of buying and leasing for your business.
 
And don't forget, there are many other things you need to think about when choosing a van – running costs, efficiency and reliability are just a few.
 
Van insurance is another thing you need to arrange before you can get your vehicle on the road. At the Insurance Factory, we take pride in providing our customers with tailored, competitively-priced van insurance. Take out cover arranged through Insurance Factory and you could enjoy benefits including excess protection, breakdown and tool cover, 14-day like-for-like van hire and cover for your keys. Get a quote today!