A company van is an essential investment for any business. However, when it comes to getting a van for your company, there are two major options; to buy or lease a van.
So, should I buy or lease a van? Find out here.
To Buy or Lease?
First, you need to understand the difference between these options.
Buying a van is relatively straightforward. It involves paying outright for a van and completely owning it. Here you own the vehicle and everything associated with it.
On the other hand, leasing involves paying monthly for using a van but not owning it. At the end of the agreement, you are required to return it. Sometimes, at the end of the agreement, you have the option to pay to keep the van.
Now, let’s look at the pros and cons of these options.
Pros: Buying a Company Van
Here are some advantages of purchasing your company van:
- One major pro is that you own the vehicle and can do whatever you want without restrictions.
- In addition, you can maintain the van to your best standard.
- You can also trade your old van to recover some of the money spent on its purchase.
Cons: Buying a Company Van
There are also some disadvantages to buying your company van:
- Paying upfront can be costly and difficult, especially if you buy a new van. It could affect your cash flow.
- Vehicles start to depreciate immediately after they are purchased.
- You are responsible for the maintenance, servicing, and other additional costs of owning a vehicle. These costs are also likely to increase the older the van gets.
- You are tasked with selling or disposing of the van when it is no longer needed.
Pros: Leasing a Company Van
Leasing a company van comes with a lot of advantages:
- As your agreement ends, you get to change your van to a newer model every few years.
- When you lease, you don’t have to deal with the problem of depreciation.
- Paying a fixed amount monthly allows you to manage your business cash flow better.
- Leasing a van means you won’t be responsible for its maintenance as you can include it in the deal.
- In addition, the VAT on leasing payments for business vans may be tax deductible.
Cons: Leasing a Company Van
There are also some disadvantages of leasing a van. They include:
- You might have to pay extra charges if you return a damaged van. This is usually fixed and non-negotiable.
- You are only permitted to drive the van a certain number of miles annually. You can incur additional fees if your distance exceeds the mileage limit.
- There are restrictions to using the van, as you cannot carry out significant modifications.
- You cannot sell the van to recover some of your money back as you don’t own it.
- To get a leasing agreement, you will need a good credit history.
Which is Best, Leasing or Buying a Van?
Businesses come with different needs and financial abilities, so this answer is not a one-size-fits-all. However, you can consider two significant factors to determine which option is the better solution for your company. These include:
1. Usage Intensity
If your company van plays a critical role and involves intense usage, you should consider getting a lease agreement. This allows you to change the vehicle after it has been used for a while, and you don’t get to bear the cost of wear and tear after a while.
2. Your Cash Position
If you have enough cash to pay a huge upfront sum for your van, then you might decide to buy your van outright.
In recent times most businesses are leaning toward leasing for their businesses.
Why?
Leasing is a more accountable option, offering the best of both worlds. The affordable monthly payments, financial security, modern vehicles and flexibility that comes with lease agreements make it a better option. Owning a vehicle comes with the risk of high costs for maintenance.
Leasing eliminates this risk and provides a simple and predictable cost that has proven to be the winning formula for modern businesses.
Conclusion
Ultimately, your decision will depend on personal or business circumstances. While buying is suitable for all businesses, so is leasing. However, you stand to gain more by leasing your company van. Remember to consider all necessary factors before making your choice.
