With emissions laws tightening, and more clean air zones springing up across the country, a lot of sole traders and SMEs are looking to upgrade their work vans.
If your business is looking for a van, there are a few ways to go about it. All have advantages and disadvantages – there is no right or wrong way, only which method suits your business the most.
So which is right for you? Let’s take a look at your options, and maybe you’ll be able to narrow it down.
Buy a New Van From a Dealer
This is one of the more simple options, though it may not be the best choice. Buying a new van requires a fair amount of money up front. And if you don’t pay for the van outright, you’ll have a strict payment plan to follow.
A new van will come with a manufacturer’s warranty, and current legislation means the van does not need an MOT for the first three years. Once that runs out, of course, you will be responsible for MOTs and any repairs or maintenance that may be required.
Depreciation is also an issue when you own your van. By the time you decide to replace it, it may not be worth much (due to wear and tear, or mileage, or age) and you may be left with an asset on the books you can’t get a decent price for.
Buy a Used Van
Buying a used van comes with similar concerns to buying a new van, such as depreciation. In the case of used vans, however, you’re not putting as much money into the asset as you would a new vehicle.
Depending on your business situation, buying a used van may be a better option. This is especially true if your work will result in a lot of wear and tear on the vehicle, then you don’t have to worry so much about sell-on value.
A downside, of course, is that the used van will be a few years old, so if you’re set on getting the latest van with all the newest features, this won’t be the option for you.
Van Ninja provide finance for used purchases, so have a look at our stock.
Long Term Rental
Renting a van can be a viable option. While it is often a more expensive route, it does come with a lot of benefits. Typically, the rental company will manage maintenance and repairs, and will supply a replacement in the case of a breakdown. You will often also have a dedicated account manager to liaise with and help you with everything van-related.
Rental contracts usually allow get-out clauses if your requirements change and you need to reduce your fleet size. On the other hand, if you need additional vehicles, you will already have an account open and it should be a simple process.
There’s a good chance your van won’t be brand new, though it will be modern. It will be drawn from a rental fleet that may be a few years old, and it will be fully maintained and have a full service history.
Van rental is something to look at if you are weight cost versus flexibility, and you might find that the flexibility outweighs the additional spend.
Our parent company, Dawsongroup Vans, is a good resource if you’re looking for more information on rental.
Business Contract Hire
Business Contract Hire is a type of lease where you take a new van for a set number of years, pay a monthly fee, and then return the vehicle once the term is up.
This is a great way to get a new van without having to worry about finding the money to buy it outright. Instead, you only pay the difference between the new value and how much it is expected to be worth at the end of the lease.
As it is new, the van will be under manufacturer warranty and will not require an MOT for three years. Many businesses take three year lease deals for this reason; by the time the warranty expires and MOTs are required, the van has been returned to the finance lender and the business starts again with a new van. New vans typically require less maintenance than used, and they meet the latest emissions standards for clean air zones.
Leases are good for several reasons. Getting a new van is only one of them. You can adjust the terms of the contract before you start, so if you have some money to put down at the start of the lease, that will reduce your monthly payments. Similarly, taking the lease for five years will result in a lower monthly payment than the same deal over two years.
Contract Hire is strict with mileage restrictions. Going over the agreed upon mileage (set by you at the start of the lease process) will result in excess mileage charges.
The difficulty you may face with leasing is getting approved with a finance lender. Van Ninja work with a wide range of lenders that cover a lot of business types, so there’s likely a lender who will accept your business, but there are limits. Your business needs to have been running for long enough to have filed its first year’s accounts, otherwise the lenders have no information to work from.
Finance Lease
Finance Lease is another lease option, that’s a little different from Contract Hire. Finance Lease requires an initial payment, followed by monthly payments over a two to five year term. Where Finance Lease differs form Contract Hire is the balloon payment. This is set to be some percentage of the expected value of the vehicle at the end of the lease term.
In a Finance Lease, you are required to sell the vehicle at the end of the term – you cannot keep it. The sale of the vehicle is designed to cover the cost of the balloon payment.
You will get a brand new van, so you get the same benefits as Contract Hire in this regard; no MOTs, manufacturer warranty, low maintenance.
As you are selling the vehicle yourself, and it is not going back to the lender, there are no mileage restrictions. As long as the vehicle is sold, and the balloon payment is paid, the finance lender is not concerned about the state of the van at the end of the contract. This makes finance lease a great choice if you expect a lot of wear and tear, or you’re taking it to a building site where it might get a few bumps and scrapes.
At Van Ninja, we tend to set the balloon payment at around 80% of the expected sale value of the vehicle at the end of the term. This gives you a little leeway in case the van isn’t worth as much as expected. However, if you do sell it for more than the balloon payment, you get to keep the difference (minus a 2% fee in most cases). This can give you a decent lump sum to put towards the next lease.
As with Contract Hire, your only challenge is finding a finance lender who will support you. This is not difficult for established businesses with good trading history, but may be a little harder with new start-ups or if your books don’t look as good as they might.
Vehicle Supply
Something that affects all the options above, and should always be taken into account, is vehicle availability. Parts shortages that originated in the factory shutdowns around the Covid lockdowns continue to plague manufacturers, and vehicle supply is limited. Factory orders continue to have an ETA of 9 to 12 months, and stock models are mostly fitted with standard options.
A Lot of Choice
It may seem like you have a lot of options, and indeed your business can go down any of the routes described here. However, with a little investigation and research, you will usually find that one option will stand out as preferred.
For most small businesses with good trading history, we would recommend one of the leasing options. Leasing allows you to get a new van without having to pay the full amount – often if you add up the payments on a Contract Hire lease, it will come to less than the cost to buy a used van. You are also covered under warranty for any issues with the van.
We would also recommend choosing an In Stock vehicle. Delays to production mean that any ETA for a factory order will be unreliable. To guarantee you get the vehicle when you need it, choose from one of our In Stock vans, and we can get it to you in around a month.
Here at Van Ninja, we can help. Our expert team can discuss your options in a lot more detail, so you can make an informed choice.
Call our sales team on 0330 122 0102 or fill in the form on our website to speak to one of our experts. Our goal is to find the right vehicle and finance plan for you and your business.
