A van is an essential investment to many businesses. Looking for the first van can be overwhelming for any buyer given the numerous sellers, offers and payment plans available. Generally, you have two main options- to buy or to lease a van. Here are the pros and cons of the two alternatives to help you determine what suits your business.
What is Van Leasing?
It is also referred to contract hire. The vehicle owner enters an agreement with the lessor to use a van for a specific period (usually 24-60 months) while making pre-agreed monthly payments. The lessee deposits at the beginning of the agreement. This option differs from buying a van as the motorist does not own the van.
Pros of Van Leasing
Claim the Van Rental Expense when Filing Returns
For VAT-registered businesses, leasing a van allows the traders to claim a hundred percent VAT back on monthly payments as long the van is used for business. Van rental is a tax-deductible expense hence claimed when filing returns.
A lease agreement requires the lessee to make monthly payments throughout the leasing period. These costs are known from the onset, which makes it easy for the lessee to budget and pay on time.
Upgrade Your Fleet of Vehicles
Using updated vehicles provides a business with a cleaner, more cost-effective fleet of vehicles. This is because van leasing offers a great deal of flexibility when you want to upgrade, depending on the terms of the contract. Vehicle owners are, however, limited to their fleet of vehicles because they don’t have the flexibility to update frequently.
Cons of Van Leasing
Hefty penalties apply when the user exceeds the mileage limit. Lease experts IVL require lessees to determine the mileage of each van before signing the contract hire agreement to avoid the additional charges.
Should I Buy a Van Instead?
Buying a van means the trader gets out a loan or pays for the truck outright. This alternative offers more freedom as the van becomes your property and you are free of the strict lease terms. You also get to modify the exterior and the interior of the vehicle without any restrictions.
Pros of Buying a Van
Savings in the Long-term
When you have paid for the cost of the vehicle, the remaining additional costs include maintenance and operational costs. As such, the vehicle owner saves on the monthly payments required on lease contracts.
Not Restricted as to the Mileage
When buying a van for trade, you are not restricted as to the number of miles you should cover in a year. No additional charges apply when you exceed specific mileage as in a lease agreement.
Capital Allowance Advantages
The vehicle owner can claim a refund against his income bill equal to the cost of the van. This applies to vehicle owners using traditional accounting techniques as they get to claim the expense as a capital allowance.
Downsides of Buying a Van
High Maintenance Costs after Prolonged Use
The vehicle wears out after some time, which increases the maintenance costs when repairing or replacing the parts.
Make sure to weigh up the pros and cons of each option based on your business and circumstances. Doing this will give you an overview of the best options available.