Need to know: buying and renting a commercial van for business

There are several options, buying new or used, or you could consider leasing one

Do you need a van for the startup business you’re launching? If so, you have several options: you can either buy a vehicle outright – whether new or used – or you could consider hiring or leasing one.

Buying outright
Obviously, if you want to purchase a van outright, you’ll be looking at a substantial outlay, and the value of your asset will depreciate over time. However, if you pay up front then they’ll be no regular payments to consider other than the usual running expenses, possibly making budgeting simpler. Also, if you buy new, your vehicle will be covered by a warranty for a number of years. Plus you’ll be free to use the van in any way you want as the sole owner, and you will be able to recoup some of the original expense in resale value.

Remember, though, you will carry the risk should anything go wrong with the vehicle outside of any warranty agreements. Tax allowances will vary according to the kind of vehicle you purchase, so check with your accountant or HM Revenue and Customs for clarification.

Contract hiring
If you’re on a tight budget then contract hiring might be the best option for you, as you will be able to choose the kind of van you need for a monthly fee you can afford. This will probably work out easier for you to manage than paying out a large amount of money up front to purchase a van outright. Contract hire agreements can last between 12 months to 60 months. The monthly fee you pay will depend on the type of van you choose, the length of the agreement and the mileage you expect to cover. You will usually be required to pay a small initial fee to start the deal. Sometimes you can adjust the amount of the upfront fee to either increase or decrease your monthly payments. There will probably be mileage limits set but you can sometimes adjust these if necessary, affecting your monthly fee.

Another financial advantage of this option is that many contract hire agreements include servicing, maintenance and breakdown cover. Also, you can change vehicles regularly without a significant increase of costs. However, bear in mind that any van you hire will have to be returned in good condition, and failing to adhere to the terms of the agreement could result in penalties.

Contract purchasing
Contract purchase agreements are similar to hiring schemes, except you have the option to buy the van outright at the end of the set term. You pay a monthly fee and when the agreement comes to an end you can keep the van by paying a lump sum agreed at the start of the contract, or you simply return the van in good condition to the supplier.

Finance lease agreements
A finance lease agreement is often the preferred option for VAT-registered businesses. You pay a monthly fee and the vehicle is included on the company’s balance sheet, with outstanding rentals represented as a liability. Up to 50 per cent of the VAT payments can be reclaimed. However, you cannot own the vehicle when the agreement finishes – it must be sold to a third party, with a “balloon payment” due at the end of the contract.

What’s next…

Once you’ve decided how to finance your vehicle, you need to find a van that suits your business needs. Research your options – think about what you’ll be using your vehicle for and look at the various van types available to find the best match.

One of the key choices is size. It’s important to get this right or it could have a negative effect on your day-to-day operations. Think about what you need to carry in your vehicle and the size of van that’s practical for your needs, be it a microvan, full size or small lorry.

Also consider how many seats you’ll need, the type of doors you require (such as double doors at the back, shutters, sliding doors, etc), storage options (internal racks, ladder racks, roof rack, pipe carriers, etc) and the safety and security features you could benefit from. There are also options like ply lining, rubber floor, steps and bulkhead that might be relevant to your requirements.

Engine size and running costs are also key considerations. A V6 engine is the norm, but smaller four-cylinder vans are available for greater fuel economy. The vehicle excise duty (road tax) you’ll have to pay will depend on the year of the van’s registration and its Euro rating, so do your homework. Also find out how much you’ll need to pay for insurance before making your final choice.

Once you’ve decided on the type of van you need, shop around for the best deal. Look online for the latest offers and don’t be afraid to put your negotiation skills to use.