Van Financing: What You Need To Know
When you start your own business, one of the first things you will want to get sorted is the work van. But you are handing out money for all of your equipment and tools, can you really afford to hand over more money for a van? Especially a new one? Buying a van with finance may be your only option to get your business on the road but what can you expect from van finance?
What types of finance are there?
If you choose to finance a van, you need to know about the different types that are available to use. Van finance will depend on different factors including your credit score so it is a good idea to ensure that it is in good shape before you start looking into financing your van.
Personal Contract Purchase (PCP)
This is one of the most popular ways to buy a van or car. Once you have decided on which van you would like, you put a deposit down to secure it. Then, you take a loan out for the rest in the form of a Personal Contract Purchase loan. These are normally done over three to five years. At the end of your three or five year contract, you have the option to pay the remaining amount outright or hand the van back to the dealership. Many people who buy their cars in this way do not pay the lump sum at the end. Instead they choose to hand the car back to the dealer and take out a new contract on a new car.
Hire Purchase (HP)
Hire purchase is another popular way to finance a car or van, however this tends to be more popular with van sales. When it comes to hire purchase, you put down a deposit in the same way that you do with Personal Contract Purchase, and you have a loan on the vehicle, just like PCP. However, the main difference is that you pay more every month with hire purchase. The reason for this is because at the end of the three or five year agreement, you do not have the lump sum payment to make. This is why it is more popular with business owners who do not want to hand their van back at the end of the term.
A personal loan is a form of finance that is taken out with the bank rather than a finance company. You take out the loan to cover the cost of the van, buy it outright from the dealer, and then pay regular monthly amounts to the bank. The van is yours to do with what you wish. When people are setting up their business, many people include the cost of their new van in the initial business loan. While this is a great way of using your business loan money, there is the option of other forms of finance which can free up the loan money to be spent on other equipment.
Personal Contract Hire or Lease
Personal Contract Hire or a lease is a form of payment plan where you will never own the van, you just pay a monthly amount in order to use it. This option is popular with delivery companies as the driver can lease the van while still being self-employed. It is possible to lease a van through a dedicated lease company or through the business you will be working with. Many delivery drivers are independent contractors so they don’t actually work for the company as an employee. If they decide to move on from the company, they have to hand the van back despite paying a large monthly fee every month to use it.
How to find the best finance deal for your work van
When it comes to financing your van, it pays to shop around for the best deal. If you can, spend a day or two reading up about the various finance options and which one will be the best for you. However, you should keep in mind that the dealership that you are planning on buying the van from has lenders that they would with on a regular basis. Some dealers have great relationships with finance companies and might be able to negotiate a better deal for you. But don’t feel pressured into taking finance with the dealer if you know you have secured a better deal elsewhere.
Old or new van?
Starting off in business can mean that you need to keep the costs down as much as you can. The idea of a second hand van does not appeal to many people for many different reasons but there are some plus sides to consider.
- Old is not that old - many second hand vans are only used for a few years under PCP and are then handed back to a dealer. It is possible to get a decent and reasonably new van from a reputable dealer.
- Cheaper - getting a van that is a bit older or has a few miles on it can mean that you get the van for a lot cheaper than if you are buying it new. This can help to keep your overhead costs down, and it may be cheap enough that you can buy it outright.
Financing a van for your business is one of the biggest steps that you can take to get your business on the road. As you can see, there are many different options to choose from and they all come with their own pros and cons. One of the first things you will need to work out, after you have picked out your van, is which finance is the right one for you.
If you have any questions about how you can finance your van, our friendly staff are ready and waiting to discuss the options we have available for you. We look forward to helping you get on the road with your business.