Best Way to Buy a New Van
In years gone past, companies would simply buy a new van if they could afford it. Perhaps a loan from the friendly bank manager may be needed, but it was a relatively straightforward business. Do you know your balloons from your HP? We guide you through some of the jargon of new van deals to help you to understand the best way for you to buy a van.
To Buy or not to Buy?
Contract Hire and Leasing
It may sound odd, but the best way to operate a new van may actually be not to buy it at all. If you rent your van, the monthly payments can be offset against any profits that you make. These are called ‘off balance sheet’ deals. Assuming you look after the vehicle and stick to the agreed mileage limits, the operator need not worry about how much the van will be worth after three years, as he can give it back and get a new one.
The ‘residual value’ worry about selling on this used van sits firmly at the doorstep of the company that owns the van – you were simply borrowing it from them. These deals are typically known as ‘contract hire’ or ‘Contract Leasing’ and usually only available to business users. Terms vary, but you should be able to negotiate the length of the contract, although they typically last three to four years.
If you would like to own the van at the end of the rental term you can pay what is known as the ‘balloon’ – the final payment which will transfer the ownership of the van from the rental company. This figure is agreed in advance and remains optional – you can just give the van back.
Think carefully about how many miles you might typically cover, as excess mileage charges can be costly. Typical deals are calculated on a 10,000 miles per annum basis – if you cover more than this, you would be better to change the deal at the beginning than paying charges at the back end.
This is effectively a loan which is usually weighted towards a deposit of a few month’s worth of repayments, 36 months of regular payments plus a final payment at the end.
This final payment is not optional and you will be the owner of the van from day one. The lender simply has a ‘charge’ over the asset, it is registered in your business’ name.
This sounds like the easiest option, if you have the finds available. However, there is still the hassle factor of selling on the depreciating asset at the end of its life. You may part exchange it for a new van, but is this the best way of getting the value from the asset? You could advertise the van for sale here at Van Locator – it is an easy process, but you still need to organise viewings with potential buyers and take the risk of payment. See our safe buying and selling guide for more information on how to practise safe van sales.
Include the Servicing Costs?
Regardless whether you are looking to buy outright or lease a new van, check whether the servicing and maintenance costs are included in the deal for the first three years. With increasing service intervals of up to 40,000 miles in some cases these costs are no longer what they once were – but should still be factored in.