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Pros And Cons Of Buying vs Van Business Leasing

Recent laws on road tax and CO2 emissions is forcing UK companies and self-employed traders to re-evaluate whether hiring or buying a van is the best option.

leasing vs buying van

Under the government’s new vehicle excise duty payment structure, the payable amounts depend on the van’s engine size and all new vans must now meet more stringent emission. However, If you own an energy efficient van usually no more than 2 years-old, there are benefits in terms of fuel efficiency.

These expenses are in addition to regular running costs and many UK businesses are expected to feel the financial strain. Furthermore, experts estimate the cost of buying a car or a van post-Brexit will incur a further 10% uplift.

 

Pros and Cons of Van Business Leasing

Capital and security

Van contract hire incurs a monthly fee whereas buying requires an initial outlay. This can be difficult for companies that do not have the capital or wish to use it in other areas of the business. The alternative is to take out a loan secured against the vehicle and your business.

Maintenance Costs

The upkeep of business contract vans is the responsibility of the leasing company. Maintenance costs are included in the contract, and when the van is in need of repair or an MOT, is replaced by the leasing firm if relief vehicle cover is taken.  

Lower Running Costs

The government’s revised road tax laws and levies on CO2 emissions has bumped up the price of owning a vehicle. With manufacturing prices likely to rise when Britain leaves the European Union, the price of buying a van for your business could be £thousands more expensive.

Annual running costs could also rise for van owners with older vehicles – which may ultimately force businesses to purchase new vehicles or opt for the cost-effective solution of van business leasing.

Cost Management

The costs of van contract hire are fixed in the terms of the agreement. You, therefore, have a predictable monthly outlay which makes it easier to manage your expense accounts. Furthermore, there are no unexpected costs to fork out if the vehicle breaks down.

Tax Relief

Business owners are entitled to 100% relief on VAT on van rentals. Furthermore, if you use a van solely for business, and not privately, drivers are not subject to company car tax.

For drivers that have access to their van for personal use HMRC also offers businesses a fixed BIK rate (Benefits in Kind) which is currently £3,170 (tax year 18 / 19). If you are in the lower income bracket of 20% you will pay a flat rate of £633 per year.

Pros and Cons of Buying A Van

leasing-vs-buying-a-car

Ownership

When you purchase a van outright, you take full ownership and the vehicle becomes an asset of the company. You, therefore, have the right to sell it on and make some money back on your investment.

No Ongoing Payments

For businesses with sufficient capital to buy a new van, you do not have ongoing monthly payments to cater for like you do with a lease hire. The exception to the rule is if you take out finance to purchase the vehicle.

No Mileage Restrictions

One of the key advantages of purchasing a van over leasing is that there are no mileage restrictions. When you hire a vehicle on a contract, you may have to pay for extra mileage in order to cover the costs of wear-and-tear should it go over the contracted mileage.

The Cost of Owning A Van

Before deciding whether to buy or hire a van, it is prudent to work out the cost of running a vehicle against the monthly costs of leasing a business van.

Whilst we cannot categorically state how much it will cost UK businesses to buy a van outright, we have assembled average costs proposed by industry specialists.

 

Will your business be better off by hiring a van? Why not download our comprehensive guide to find out. Our Quick Fleet Guide is full of professional tips to help you manage a fleet of vans and provides insightful advice about the type of costs to include when calculating the cost-effectiveness of buying or leasing.

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