Looking for a new van? Have you considered Hire Purchase?
Looking for a new van can be an exciting, nervous and potentially stressful time as you mull over all of the possible new vans and van finance options. At Car & Van Finance Direct we are here to help, here we take a closer look at van hire purchase as a way of financing your new van!
Van Hire Purchase
Van hire purchase is the most traditional way of financing a new van and tends to be the most straight-forward, particularly if you want to own the van at the end of the van finance term.
A typical van hire purchase contract will run for a fixed period between 2 and 5 years. This starts with you paying a deposit or initial rental which is usually a sum equal to the full VAT of the van however you can opt to pay a larger deposit in order to bring down the cost of the monthly rentals should you wish.
By owning the van at the end of the term, there are no mileage or damage restrictions to worry about and hence you are free to do completely as you wish with the van. This wouldn’t be the case with van contract hire agreements where you return the van at the end of the term and have to pay for any damages caused to the vehicle.
Van hire purchase tends to be an attractive van finance option for those van drivers who cover a large number of miles r those with vans which may get ‘knocked about’ such as builders for example.
Van Hire Purchase benefits
Taking out a van hire purchase agreement can offer some significant benefits, if you are VAT registered, then VAT can be offset against your VAT bill, if you’re not VAT registered then you are able to pay a lower deposit.
When you purchase a van on hire purchase, the van appears as an asset on your business balance sheet, meaning the cost of the van can be written-down using the standard writing-down allowances, unless using the Annual Investment Allowance (AIA).
The interest you pay on your van finance agreement can be reclaimed against your tax bill, you are also able to offset the capital allowances against tax if you only use the van for business purposes, and this is also the case for the van’s running costs. With a new van you also get a full manufacturer’s warranty so you have the peace of mind that everything is covered.
Van Hire Purchase drawbacks
The largest downside to van hire purchase is that of depreciation, although this can be written-down against taxable profits. Vehicles don’t appreciate, so the higher the mileage the less your van is likely to be worth when it comes to selling it. You are also fully responsible for the maintenance of the van when it is yours to own, this covers everything from repairs, insurance maintenance and road tax.