Should You Buy or Lease a Van?

If you are looking to buy a van, have you ever looked at leasing? We will explain in this guide the pros and cons of leasing a commercial vehicle and which option would be best for your business.  

What is the Difference between Buying a Van and Leasing?  

Buying a van is the most traditional way of owning a vehicle and that is paying for the vehicle upfront. This can be achieved by two different methods, either by paying outright cash or you can take out a loan using van finance and pay off via instalments. Once you have paid the full amount of the vehicle or the loan, you will become the owner of the vehicle.  

This is in comparison to leasing, which allows you to drive a brand-new van by paying a monthly payment. Lease payments are usually cheaper than monthly loan payments. Compared to buying a van, you will not own the vehicle at the end of the lease.   

Instead, at the end of the contract, you will return the vehicle to the leasing company. This is because the leasing company has ownership of the vehicle. You will then have the choice to lease another vehicle or walk away. There are other finance options, where you can own the van after the contract has ended, which is van hire purchase.

Buying a Van for Your Business  

The default choice for most businesses looking at a new van is to buy it outright. So, what are the pros and cons of this?  

Advantages of Buying a Van  

• Ownership of the vehicle: If you buy a van for your business, the benefit is that you won’t have to worry about paying monthly instalments, and you will own the asset. This will allow you the opportunity to do whatever you would like to do with it, including selling it.  

• No restrictions: When you buy the vehicle outright, you have unlimited flexibility when using the van. This means you won’t have to worry about any extra charges if there are damages to the van or any mileage restrictions.  

• Lower Expense: Over time, buying a van can be more cost-effective than leasing, as you will be avoiding any monthly lease fees.  

Disadvantages of Buying a Van  

• Upfront costs: Paying for a vehicle with an upfront cost can be difficult for businesses, especially those that are either start-ups or small.  

• Depreciation of the vehicle: Just like any vehicle, vans will depreciate over time, as the vehicle reduces in value as it ages. If you are looking to sell the van in the future, you will not be able to recover the full value of the vehicle you initially paid for.  

• Maintenance and repairs: If you own the vehicle, you will have sole responsibility for all maintenance costs and repair costs.   

• Disposal: By owning the vehicle, it is the owner’s responsibility to sell the vehicle, which is what most owners dread. There is a good reason to, you will have to negotiate the best price for your vehicle (which will probably never be what you want), and this will include time-wasters.   

Leasing a Van for Your Business  

Leasing a van for a business will mean that you won’t technically own the vehicle, but instead you will be able to use it for the agreed time period of the lease (usually between 3 to 5 years) and pay for the usage by making affordable payments. When looking to lease a van for business, there are advantages and disadvantages to consider. And these are the following:  

Advantages of Leasing a Van  

• Fixed affordable monthly costs: Before leasing a van, you will agree to a contract, which will involve agreeing to a monthly fee. This monthly fee will not change throughout the agreement. This provides you with the advantage of monitoring your finances much more easily and enabling you to forward-plan plan budget much more efficiently.  

• Lower cash outlay: Using van leasing requires a much more outlay compared to purchasing the van, as you will only need to pay a small upfront payment.  

• No depreciation costs: Once you drive a brand-new van, the depreciation of the vehicle starts immediately. When you lease a van, you will not have to worry about a depreciating asset that has gone down in value compared to buying it outright.  

• Tax benefits of Van Leasing: If your business is VAT registered, then you are liable to claim back your monthly lease payments as a tax-deductible expense.  

• Access to newer models: Another big positive is that you are able to drive the latest model every few years. Similarly to replacing your mobile phone and upgrading to the latest model.  

Disadvantages of Leasing a Van  

• Mileage and Restrictions: For most leasing agreements, there are restrictions. One of these restrictions is that you will need to declare your annual mileage for the duration of the lease. If you go over the agreed mileage limit, then you could incur mileage charges. 

• Cost over a longer term: Leasing is initially hiring a van for a specific period of time. This is between 2 to 5 years. While the monthly payments are less than the financing for the purchased vehicle. However, there is the possibility that the overall cost of leasing could be higher over an extended period.  

• You won’t own the vehicle: Through leasing, you will not own the van at the term. This will mean you will not have an asset to sell or trade in for value. If you would like to have ownership of the van, then leasing might not be the option for you.  

Buy or Lease Your Next Van- Which Option Should You Choose?  

Making a decision whether you want to buy or lease a van depends on the needs of your business. Leasing a vehicle is perfect for those businesses looking to keep the upfront costs and the ability to forecast their business finances more effectively. There is also an opportunity for businesses to upgrade their vehicles to the newest model on a more regular basis, as well as having the potential for tax benefits.  

On the other hand, if your business is looking to keep the van for a long period of time, then buying the vehicle outright might be the best option for you. You will also have the freedom not to worry about the restrictions on mileage and have the potential to trade in or sell your vehicle in the future.  

Both leasing and buying have pros and cons, and every business is unique, so this decision comes down to preference that is best suited towards your business. If you are struggling to make a decision, then our team at Rampage Vehicles are here to help. We can provide valuable advice, and the most competitive leasing deals or deals on buying a brand-new van.   

Get in touch with our team online or call us on 01925 506 127, and we will make sure we find the best finance option for your business.