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How is leasing a van different to buying a van?

There are a few differences between the two: namely, the amount you pay, when you’ll pay, and your options when you want to change your vehicle.

Let’s look at the key differences between the two:

Owning the Van

What’s the biggest difference between buying or leasing a van?

It’s the owner of that vehicle.

If you buy the van outright, you will have full ownership of the vehicle and have full control over how it is used. When it comes to leasing a van, you will not own the vehicle and you will be renting the vehicle from a funder or funding house for an agreed term with a set mileage limit.

At the end of your lease there is no option to own the van.

Upfront costs

If you are buying the van outright, you will need the full funds available to be able to do this. If you choose to buy the van through finance, most of the time you’ll need a large upfront sum that’s bigger than an initial lease payment would be. 

Contract hire gives you the flexibility to pick and choose the car you want and drive it away with very little initial investment.

The first upfront payment can be as little as one monthly payment or as many as nine. You will have the choice of how much you want to put down, whether that’s 1,3,6, or 9 months.

When it comes to your lease payments, you’ll pay roughly the same over the course of the term however much your initial payment is. But a bigger upfront payment will likely lower your ongoing monthly payments.

Paying a larger sum upfront may also result in the funder reducing their fees as you’re effectively borrowing less money.

If you’d like to drive a newer, more reliable van without the hassle of everything else that comes with buying a new vehicle, leasing is definitely something to consider.

Monthly Payments

If you buy your van outright, the main benefit is that you don’t have any ongoing financial commitments. You simply pay for the van outright and it’s yours!

If you decide to lease your vehicle, it’s yours to make use of for the agreed term, and you will have to commit to making monthly payments of the set term.

The cost you’re paying is for the depreciation of the vehicle over the length of time you have it, plus the fee applied to the finance amount you haven’t covered with your first payment.

Changing Vehicles

If you’ve bought your van outright it's yours to keep and do what you want with. You can switch your vehicle whenever you would like, but that will also come with the responsibility of selling it on when you’re ready to change vehicle.

With a lease, it’s generally not financially responsible to exit before the end of your agreed term. Although it is possible, you could end up with large fees to pay.

When you reach the end of your lease agreement the van is collected from your preferred address, and you can effortlessly swap it for another van.

Future Value

There are always financial implications in purchasing assets that will decrease or increase in value over time. One example of an appreciating asset is real estate, but unfortunately – and unavoidably – vehicles do depreciate in value from the moment they are driven off the forecourt.

With a lease, the depreciation is set at the outset of the agreement and is, therefore, the funder's risk, and not yours.  

Mileage

Leases do come with a few restrictions, with mileage being one of them.  

Mileage and depreciation go hand in hand. The more miles you drive, the more the cost of the van depreciates, which in turn means your monthly payment is likely to be higher.

If you exceed your agreed mileage limit you will be charged for the excess usage outside of your agreed term.

Obviously, if you buy your van outright there is no mileage limit. Unless you set yourself one. The van is yours to do with as you wish, with no restrictions or repercussions.

It is worth bearing in mind though that your van will still be depreciating in value – the more miles you do, the less your van will be worth.

Wear and Tear/Maintenance

When leasing your vehicle, we would expect the van to be returned at the end of your agreement in a reasonable condition.

Any further damage to the vehicle will increase the depreciation of the van, and you'll be liable for the cost of repairs. If the damage is not fixed before you give it back, it’s likely to cost you more as the funder will charge you for the damage.

All leases are bound by the BVRLA’s Fair Wear and Tear guide which explains what is deemed as an acceptable condition in which to return your leased van. This considers everyday use, so minor scratches, chips, or general wear and tear can be deemed acceptable.

When you own your vehicle outright, you are obviously responsible for fixing any damage – though it is your choice whether to get the dinks and dents seen to.

However, the higher the mileage and the more damage caused to the vehicle will decrease the vehicle's resale value.

Customisation

When you own your van outright, you’re free to make as many tweaks and changes as you want.

When you have a leased van certain changes can be made. A general rule of thumb is that if the changes – for example, a fridge conversion on a chassis cab – can be removed before you hand it back with no visible damage to the van, you’re good to go.

It’s always worth talking to your funder though, and seeing what they say.

Credit History

If you’re looking to buy a car outright the only thing required is the funds to do so - no credit check is necessary as you won’t be borrowing money.

If you would like to lease a van, you will be required to submit a finance application. Part of this application includes a credit check - if your credit rating is not in great shape, it’s unlikely your application will be successful.

If this is the case buying your van outright may be the best option for you.

To summarize, the main thing that differentiates the two is both the freedom you have to make changes to your own vehicle, and the hassle of reselling and maintenance.

If you’re looking for an easy way to drive away in a new van – and free up some capital in the process – leasing could be the way forward.

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