Leasing vs Buying: What’s the best choice for your van?
There are more than three million vans in the UK, making up more than ten per cent of the total number of vehicles on the nation’s roads. They’re vital for helping the businesses that make up the backbone of the UK’s economy, helping them to deliver goods and services to clients and customers alike.
The need for a van is commonplace but, when you’re shopping for one for your business, should you buy or lease your vehicle? It’s a fairly common debate for people buying new cars for private use, but here are the factors to bear in mind when searching for the right van for your business.
Buying provides you with an asset
Clearly, if you buy your van – either by getting together the cash or by taking out a loan – you’ll have an asset. This is something you can sell or trade in later down the line and gives you something tangible for your money.
It also gives you the opportunity to haggle over the price tag, as you would when buying a car, and the freedom to do what you want with the vehicle once you have it, free from the restrictions of a contract and any restrictions that might carry with regards to mileage.
Many businesses might also want to deduct the cost of a purchase from their profits before they pay tax within its capital allowance.
Leasing is flexible
Buying is not for everyone, however. If you’re likely to require a new van every few years then leasing is for you. It allows you to browse the likes of LeaseVan for the latest models when your term comes to an end and select the vehicle most suited to your needs and budget.
Leasing a van typically requires a much lower up front cost, reducing the instant cash drain on your business. Contracts also often cover maintenance and breakdown cover – removing the burden of this ongoing cost from a business.
Half of the VAT on the finance can be claimed back and, as Business Car Manager demonstrates, with a business car lease you get 100% of the lease as taxable allowance on your profit and loss account – as long as the CO2 emissions are below 160g/km.
It’s also one thing to have a tangible ‘asset’ but quite another to be left with a vehicle that has depreciated in value in a matter of months. In this way the biggest plus point of buying can become a negative, leaving you with an ‘asset’ of little value to ‘get rid of’.
What’s the answer?
Buying a van outright can be a risk for a business. It requires a bigger up front cost and leaves a company liable to ongoing – and sometimes unexpected – bills for repairs and maintenance. Leasing helps to spread that cost over the longer term and ease the burden of unexpected repair costs, making it easier to keep your drivers in newer vehicles and plan out the cost over a longer term.
If a business has the money and wishes to obtain an asset for its outlay then buying is an option, in most other cases it may well be wise to enter into a leasing agreement.