When buying a new van for business, there are many decisions to consider, but the biggest choice is often how to pay for it. You should seek the advice of your Cheltenham accountants such as www.randall-payne.co.uk to seek the best way for your business to finance a new van, as the best options will vary depending on your business set up and profits.
Across the UK, most cars are bought on finance, but it is important to compare all the options.
Buy with Cash
Many van owners prefer the traditional route of purchasing their van with cash outright. A key advantage is that there are no additional payments to keep budgeting for. A new van will also have a full warranty from the manufacturer that guards against nearly all mechanical issues.
The downside is that you are entirely responsible for all elements of its upkeep. As soon as you leave the dealer’s forecourt, the van will also start losing its value.
This allows you to pay a fixed monthly cost that creates easier budgeting and also frees up capital due to the small initial outlay to begin the deal.
Another bonus is that you do not need to worry about what happens to the van when it reaches the end of its life. The hire company takes it back, and you can then choose to replace it on another hire scheme or not. You also do not bear the depreciation costs of the van, and most schemes also include maintenance and servicing in the package, making it as straightforward as possible with no unexpected costs arising.
The downside is that you must abide by the contract terms, and most schemes will include an agreed mileage and that the van must be returned in a good condition. There are penalties for returning the van with too many miles or damage; ensure you check the fees and terms and conditions before signing the contract.
A finance lease agreement is similar to contract hire, but you will never own the van at the end of the term, as it will be sold on to a third party.
Finance deals often make the most sense for business, but it is important to be aware that as interest rates vary, your monthly payment will go up if rates increase. There also may be administration or documentation fees at the start of the deal.