Choosing to get/buy a new commercial van for your business (SME) can be a rather tricky endeavour. For one, you will need to put the cost of the van, insurance, and tax, among other factors, into consideration before going ahead with the idea. Another option would be to lease one. If you, however, are torn between buying and leasing, here are a few key considerations before making the final decision. Factors such as why you need the van and insurance should also be considered as well.
1. Know the Reason for Financing a Van
The reason for having the van, and how (where) it will be used should be considered when deciding between leasing and buying. An excellent example of this is if the van will be used at a construction site or a potentially ‘dangerous’ environment. The risk of it being bashed or dented is rather high, which could also mean extra expenses and fines from the leasing company. You would also be required to be upfront with the leasing company each time you wish to use the van for a different mission. Most companies will also restrict use and mileage on their vans until fully paid for too.
Buying the van, on the other hand, means you can use it however/whenever/wherever you wish without seeking anyone’s approval. Only the insurer should know how the van will be used. This makes ownership a better option if, for example, looking to use the van in construction sites.
Take into consideration how the van will be used, and the risk factors when choosing between leasing and buying. Most SMEs will, in most instances, prefer leasing, and especially if looking to maintain an image.
2. Weigh Your Options (Leasing vs. Buying)
Buy: This simply means purchasing the van outright. Although this will take up a large chunk of money from your bank accounts, it is a one-off investment. The other good thing about buying the vans is that you have the freedom to sell them off as soon as their work is done. As a rule of thumb, any vehicle will start depreciating as soon as it hits the road (from the dealer). Owning the van, however, means you don’t have to deal with leasing companies and their restrictive contracts.
Lease: A typical lease lasts around three or four years. You, however, have two options should you choose to go this route: financial lease and hire purchase.
Hire purchase: You will be required to put a down payment, then pay a set amount of money each month for a said period. You also have an option to purchase the van (at a small fee) at the end of the contract.
Financial lease: With this option, the dealer remains the owner of the van during the life of the contract. You, however, have a leeway into how you pay for it. You could choose to pay the total cost of the van, plus interest, within an agreed time. You could also choose to pay lower ‘monthly rental’ fees with a final balloon payment (estimated resale of the van at the end of the lease).
Leasing enables you to pay a deposit each time you wish to upgrade, which again means you can get a new and more efficient van each time. It also eliminates the risk of depreciation, or the need to get rid of the older van. In other words, leasing is a better option if looking for a cheaper way to have/use a van without necessarily owning it. Buying is, however, a preferred option for those looking for limitless mileage and long-term ownership plus use.
3. Think About How You Want to Modify the Van
Do you wish to add modifications to the van? Some of the typical changes, such as decals, racks, dash cams, etc., are considered small and reversible, hence could be allowed by the leasing company. Any irreversible modifications should only be done if looking to buy the van at the end of the lease period. There are lots of ready-to-work options available for smaller fleets, something a small business can take advantage of.
4. Window-shop for the Best Van Your Business Needs to Have
Many car manufacturers and major firms will have specific business centres where fleet buyers can walk in and take advantage of various offers. Take time to visit different vendors and dealers to see what they have to offer. If looking for more than one van, you can then look for companies that specialise in business fleet leasing for a more convenient solution. You could get several vans at a bargain and a cost-effective contract too.
Shopping around also increases the chances of getting yourself the latest vans, as well as larger vans ideal for various uses. Larger vans are particularly ideal for specialised ranges in trade (e.g., electrician ranges), as well as transporting goods. It is also by window-shopping that you can identify potential dealers you would go to in the future. For those dealing with hundreds of vans per year, contacting the manufacturer directly can not only get you a good deal but also have the vehicles custom-designed to your requirements and specifications.
5. Consider Trade-In or Part Exchange
Some dealers may let customers to part exchange or trade-in with a new van. One of the best ways to do this would be through a specialist car-buying website, a dealership, or even a broker.
6. Read and Understand Lease Contract Limits
You are more likely to face mileage restrictions and limitations on what you can and cannot do with the van during its lease period. Although these may come standard, it would be best if you looked a little more closely in their terms and conditions, and particularly the manufacturer’s inclusions and breakdown cover. You’ll also be required to sign to a binding 3- or 4-year contract with the company. Choosing to end the agreement early will only result in penalties on your business as well. That said. You might want to weigh between leasing and buying the van. Take vehicle costs, tax, and insurance into consideration if looking to buy the van. Leasing the van may, however, mean not paying for insurance, as the dealer will have taken care of that.