Leasing is the dominant method of financing services in variety of different methods. It’s also one of the most popular ways of procuring a van for your business. As with any of them, though, whether or not it’s the right option for you depends highly on usage criteria. Read on to find out if you’re making the right choice.
How Does it Work?
First of, it’s important to define how leasing a van works compared to buying a vehicle outright. There are several different methods of leasing a van. You can find more information here, but the two primary options are a business contract hire, where you simply rent the vehicle over the course of the contract, or a business contract purchase, where you have the added option to purchase the vehicle. In each of these scenarios, you’ll pay a fixed monthly fee to the lender that will be highly dependent on factors such as the make and model of your vehicle, your annual mileage limit, and the length of your contract.
Does It Save You Money?
What any business owner will be asking themselves is whether or not leasing will save them money in the long-run. While there’s unfortunately no hard and fast rule that dictates whether or not you’ll save money, you can make educated predictions depending on your usage requirements and the vehicle in question. The biggest factor you’ll have to take into account is the fact you won’t have to deal with the high costs of depreciation. Most vehicles will lose around 60% of their original value after three years on the road, though it can vary. Look at the model’s history to get a better idea about it’s future value and compare it to the price of the lease.
Additional Pros and Cons
It’s also worth considering the additional pro and cons that leasing provides. Leasing is ideal for businesses as they can typically reclaim 50% of the VAT. In fact, you may be able to claim 100% if you can prove that the vehicle is only going to be used for business use. However, if you plan on covering large distances with the vehicle, pay close attention to the annual mileage limit of your contract. Lenders often try to keep this at a minimum to try and protect their asset. If you end up exceeding the limit, you’ll have to pay a penalty fee for each mile overdue.