There are almost as many different ways to finance your replacement van as there are options to choose from, so how do you decide what is the best way for you?
When it is time to start looking for something new, or used, it can be a daunting prospect, what’s best to buy and how to fund it can cause such a headache for many that it’s little wonder they opt for a straight repeat of the previous purchase using the same acquisition method.
However, could you be missing out? Could you be getting a better deal? In short, how do you get more bang for your buck? This article aims to explain the different options for funding, and how they could work for you.
Before I move onto that though, here a few things that you may not have immediately considered. Big business spends millions of pounds promoting their brands and it works. We can all recognise major brand logos and feel an affinity with them. That’s marketing. It’s about making you feel comfortable with a brand and confident when you make the purchasing decision. In essence it makes your decision easier to make, you are removing an element of risk and buying something that you can trust.
Your business, like ours, probably cannot afford such luxury as million pound marketing budget which means we all have to be a bit cuter when it comes to promoting our businesses.
You may well have branded polo shirts or workwear, we accept that first impressions count and this is where your van and it’s presentation is vital - for many seeing your van may be the first interaction potential customers have with your business.
What is the point of having nice business cards, a professional logo and stationary, website, etc if your van lets you down? It’s sometimes your office, could be your workshop, but it is always a mobile advertising hoarding and as such it represents your business. Therefore you want your van to put your potential customers’ minds at rest, give them the feeling you get when you see a brand that you are familiar and comfortable with.
I am not saying that you have to buy a brand new van to make the correct impression but certainly one that is presentable (if used) and definitely sign-written. A basic set of vinyls will only set you back about £200 so be sure to add that to your budget.
Have you always bought used and paid cash? Have you got, like many self-employed or start-ups a bit of a dodgy credit record? What does your accountant advise?
Once you have decided to buy used or new, it’s time to look at how you can pay for it. It might be that your business is cash-rich and there could be tax advantages for buying outright. Other options could be bank loans, and other form of finance, leasing or contract hire. The cost of the vehicle is not just that though, you really need to consider whole-life costs. For instance, SMR (service, maintenance and repair), Vehicle excise duty, cost if finance (if any) and, the big one, depreciation should all be looked at when preparing your budget.
As previously stated, there is a number of different options to fund your new van and in many ways it’s easier than ever to get the keys to a new vehicle.
Quite rare these days to see someone walk into a dealership or second hand plot and hand over a wad of folding money! Basically, pay your money, own your van and you are responsible for everything.
Financing a van is usually done in one of two ways: a loan, bank or via an independent lender, or as a HP deal (Hire Purchase), where the value of the loan is guaranteed against the value of the vehicle.
A standard bank loan makes sense if you have a really good credit history as you’ll get a competitive loan rate, but sometimes there are decent manufacturer 0% deals on offer and no bank can match that!
Hire purchase also works out best if you can’t get a conventional loan, as it’s usually measured against affordability vs your household budget rather than strict credit referencing. The van would provide collateral against the loan so if you miss too many payments it will be repossessed.
With a bank loan, the car is your asset from the outset, and if the borrowing is unsecured, nobody can take your car back if you miss a monthly payment – though you will still owe them the money!
Leasing is basically a long-term rental agreement that normally comes with a mileage cap. You will never own the vehicle, you just pay for it’s use. You pay your monthly fee and that’s it, maintenance, Vehicle Excise Duty, tyres are all normally included, you just need to put in the fuel!
Based upon a Vauxhall Vivaro sportive with these assumptions
35 monthly rental payments plus initial payment of £2,394.00
Finance quote from Money Supermarket.com.
Leasing price supplied by Northern Vehicles Limited based upon a quotation for a customer with a bad credit rating.
|New Van purchase v Contract Hire/Lease
|Outright purchase||Leasing/contract Hire|
|Depreciation 3yrs/60K miles||£15,337||-|
|Vehicle Excise Duty||£735||-|
|Cost of loan (Average)||£3181||-|
|Total Cost of ownership/lease||£35,310||16,359|
|Monthly cost of ownership||£980.00||£454|
On the face of it, it looks like a lease package of some kind would work best. You will never own the vehicle but you have not got to worry about anything and, at the end of the contract, hand it back and take a new one.
With outright purchase, OK, you end up at the end of the three years with an asset worth £5846.00, but it is a 3 year year old van with 60,000 miles on the clock. This then puts us back to the beginning of this piece asking once more: How do you want to promote your business?
|Used Van Puchase v Contract Hire/Lease|
|Purchase Budget||Leasing/contract Hire|
|Vehicle Excise Duty||£735.00||-|
|Cost of loan (Average)||£920.00||-|
|Total Cost of ownership/lease||£10735||16,359|
|Monthly cost of ownership||£300.00||£454|
At the end of this period, you will own a van that is old, tired and with heavy mileage. How reliable will it be and what impression will this give of your business to your customers?
As a special reader offer for VanOwner members, Northern Vehicles are offering a free DashCam on every vehicle taken out on a lease. For more information and a tailored quote, please use the contact form below.