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16/06/2023
Read time of 6 minutes.
It can be confusing to work out whether buying or leasing is going to be right for you and your business, so we’ve compiled a guide to the main differences between the two to help you make that decision.
Ultimately, it’s going to come down to your business needs – and how much money you have.
But should you buy or should you lease?
The biggest difference between buying and leasing a van is simple: if you buy a van, you own it, and if you lease a van, you have to give it back.
But there’s a bit more to it than that.
Buying a van is an attractive idea to those who like the idea of ownership, and want to own their van for years to come or want a used van. If you buy, however, you are then liable for any costs associated with the vehicle, as well as the hassle of selling on a depreciated asset when you want to get rid of it.
You could very well end up out of pocket, depending on how much your van’s value depreciates and how much you sell it for.
With leasing, because you never own the van, you don’t have to deal with the depreciation or costs of ownership.
And though you’ll never own the asset, you will get to use it almost like you do for the term of the lease – like with renting a house – and at the end of the contract, you simply hand it back and move on.
The main benefit of buying a van is that once it’s paid off, it’s yours.
Whether you buy the van on a finance plan, like Hire Purchase, or you purchase it outright, you own the asset and can essentially do what you want with it – no catches.
You can sell it on whenever you want, there are no annual mileage limits, and you don’t have to repair any damage if you’re not that fussed.
It does give you a lot more freedom, but those freedoms come at a cost.
Buying a van can mean a huge initial investment, even if you’re looking at a finance plan.
If you’re just starting out, or money is a bit tight, it can be tricky to find this sum and means you can’t invest the money elsewhere in your business, ultimately impacting your cashflow.
A new van will also start to depreciate the minute you drive away in it, and in a volatile market, means when you do come to sell it on you could lose money, and end up spending more than you intended to overall.
There are a multitude of benefits that come with van leasing.
These include:
Having a fixed monthly cost for your vehicle can help when you’re working out your budget. You’ll know exactly how much you’re spending on your van, and if you include a maintenance plan, you’re also covered for a lot of routine maintenance without having to spend out when you’re least expecting it.
You’ll also benefit from being able to drive the latest van models.
Not only are these generally safer, thanks to improved tech and driver aids, but they’re generally more comfortable too. You’ll also be covered under the manufacturer’s warranty, and it’s highly likely you won’t have to MOT the van before the end of your contract, if you opt for a two or three-year lease.
And with a lease comes the advantage of not having to worry about depreciation or the hassle of selling.
The cost is already factored into your monthly payments, and all you need to do is hand the van back at the end of your contract.
There are also tax benefits available. If your business is VAT registered, you can claim back your monthly payments as a tax-deductible expense.
Like everything good in life, there are some downsides to leasing a van.
If you like the idea of owning your van, leasing is likely not going to be the right finance plan for you.
Early termination can be expensive too, so you’ll need to make sure that the van lease you pick isn’t just suitable for your business now, but also your business in two, three or four-years’ time.
You’ll also have to work out how many miles on average you drive each year, as a mileage limit is included within your lease contract. If you exceed your agreed mileage, there is an additional cost to pay. But if you know roughly how much you’re going to use the van, this won’t be an issue.
The same applies to damage to the van, too.
Your funder will have to adhere to fair wear and tear guidelines, so you won’t be penalised for everyday wear on the van. But any substantial damage that isn’t fixed before you hand the van back can be subject to an additional cost.
You can, however, sign write your van if you want to add your branding and services for some ‘free’ on-the-go advertising.
At the end of the day, whether you buy or lease is going to be down to your company's specific needs, and your budget.
If you’re not fussed about owning the asset, you like the idea of being able to budget easily, and you want to free up that cash to be used elsewhere, then leasing is going to be the right finance plan for you.
But if you really want to own your vehicle, then buying is likely to be the better option.
Got any questions about leasing?
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