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Van Finance Guide
Van Finance can help all businesses, from sole traders to large companies, buy the small or large vans they need to keep their business moving.
With van Finance, you are able to buy a new van, or used van, without having to put all your cash into the purchase.
Buyers find using van finance lets them buy a higher spec vehicle than they would normally be able to afford.
With such a large panel of lenders, we are able to give you a national service with the care and attention of an independent, family business – win-win for you and your business.
What Is Van Finance?
Van Finance is a finance product tailored to the needs of the business or person buying a van. Whether you want a large or small van and no matter what sort of van, there are specific finance options available for you.
Van Finance gives you and your business exclusive use of a van, or pick up truck, for the duration of the finance agreement. In some cases, you would own the vehicle at the end of the term, with other options you are free to hand it back with no further obligation.
Van Finance, including Van Leasing and Van Hire Purchase, has grown in popularity for sole traders, Limited Companies and partnerships. Instead of using banks, there are some advantages to using van finance.
A bank would normally take a charge over all the assets of your business but with Van Finance, only the van is collateral for the loan.
The repayments are fixed, so no matter what happens to the Bank Of England Base Rate, your monthly cost will stay the same, allowing for easy budgeting.
They are easy to arrange and when you come to the end of the agreement, it is easy to set up a new Van Finance agreement.
How Does Van Finance Work?
You will find the van or pick up truck you want to buy and agree on the purchase price.
You then contact us and let us know if you want to own the van, or just have use of it for a certain period of time.
A deposit will be needed typically, two months rent or the VAT at a minimum. Depending on the sort of finance you want you will then have a set number of payments, after which you will either own the van or give it back to the funder.
To keep monthly payments down, some Van Finance facilities have a balloon payment at the end. There are finance options should you then want to refinance the balloon over a longer period, if that suits your circumstances at the time.
Will I Own the Van?
It depends on the type of van finance you take out. With Hire Purchase or a Lease Purchase, you would own the van or pick up truck after the final payment has been made.
Until you have made the final payment the vehicle will still be owned by the funder.
To own the van after the finance has been paid, you can use a Van Hire Purchase or a Van Lease Purchase.
Hire Purchase could be the right option for you if you want to own the van at the end of the finance agreement.
At the start you will have to pay the VAT as an initial payment. You can also put down a further deposit if you want.
The balance of the purchase price is then paid over instalments.
After the last payment of the van finance agreement you will own the van.
Hire Purchase Payments
The more you put down as a deposit, the less you will pay per monthly instalment. A larger, upfront payment, will also reduce the amount you pay in interest over the whole of the loan period.
You can take out a Hire Purchase over a period of, normally, up to 5 years (60 months).
You can offset the interest charges against your business profit. The van will show on your balance sheet and you can benefit from tax relief on all the interest charges.
If you’re VAT registered you’ll be able to reclaim the deposit.
What Are The Benefits Of Van Hire Purchase
Hire Purchase is a simple form of van finance that most people will be aware of. The advantages of using Hire Purchase include:
No mileage restrictions – Use the van as much as you want
Flexible payments – Spread the cost over a period of up to 5 years
Payments are fixed – Allowing you to budget easily
Own the van – You will own the van after the final payment has been made
Are There Disadvantages Of Van Hire Purchase?
The disadvantages of Hire Purchase to consider are:
You don’t own the vehicle until the final payment is made
If you don’t keep up the repayments, the van could be repossessed
Borrowing money incurs interest, making the cost of the van higher than buying with cash
Non-payment can affect your credit rating
Van Lease Purchase
With a Van Lease Purchase, you will end up being the owner of the van, taking legal title to it.
You will have an initial deposit, which would normally be 2-3 monthly payments.
The length of the agreement can be up to 60 months. The monthly payments are fixed, allowing you to budget, though they aren’t subject to VAT so it’s not VAT efficient.
There will be a final balloon payment to be made at the end, which you will be responsible for.
There is no option, with this sort of lease, to give the vehicle back to the finance company.
What Happens At The End Of The Lease Purchase?
At the end of the lease term there are 3 options:
You can sell the van to pay the balloon payment. If there is a shortfall you’re responsible for it
You can part exchange the van for a new one
You can pay the balloon and own the van outright, with nothing more to pay
Some Advantages Of Lease Purchase Agreements:
Own the van – You will own the vehicle at the end of the agreement
Flexible agreements – You can spread the payments over 60 months
Fixed interest rate – You can budget easily knowing the payments all through the agreement
Can I Give The Van Back?
With some lease agreements, you won’t become the owner of the van or pick up truck. At the end of the agreed period, you would give the vehicle back and, in the case of a Finance Lease, the vehicle would be sold and you would receive most of the sale proceeds. Depending on the funder, this can be up to around 95% of the sale proceeds.
As long as you have satisfied the conditions of return, such as keeping within set mileage, you would have no further liability for the vehicle.
Van Finance Lease
If you aren’t wanting to own the van at the end of the loan agreement, you could take out a Van Finance Lease.
With this sort of Van Finance, the payments will cover the full amount of the van’s value and interest to the funder.
You will have a fixed monthly payment, allowing you to easily budget your payments. An initial payment is needed, which will be 1-2 months payments, with the rest of the value spread over the lease term of up to 60 months (5 years).
There are Finance Lease options where you can have a balloon payment at the end. This keeps the monthly payments low but you are liable for that payment at the end of the term. If the van is worth less than the expected at the end of the agreement and there is a shortfall, you still have to pay it.
What happens at the end of the Finance Lease?
You won’t get to own the van at the end of a Finance Lease, instead, there are three options:
You can hand the van back, with no more liability
You can sell the van to a third party and keep 95% of the sale price
You can take out a secondary rental for a further period for a peppercorn amount, often a month’s payment
Some Advantages Of Van Finance Leases:
Keep using the van – You can carry on using the van after the agreement, if you wish, for a nominal amount
Keep monthly payments low – Having a balloon payment at the end can give you more affordable monthly payments
Keep proceeds of sale – You will receive around 95% of the sale proceeds when you or the finance company sell the van
Can I Get Van Finance With Bad Credit?
Having a bad credit score can seem like it might mean you aren’t able to get Van Finance. That doesn’t have to be the case though.
We have a large panel of lenders who are able to finance vehicles and not all their products require clean credit.
Your exact circumstances will determine what can be done, so it’s worth getting in touch with us to discuss what you need and how we can help.
Does My Business Qualify For Van Finance?
Van Finance is available for all sorts of businesses and industries. Whether you are a sole trader, Limited Company or LLP, you can qualify for Van Financing.
You will need to provide some information about you and your business for the funder to make a decision, such as business bank statements and company accounts.
We don’t like to say no, so it’s worth giving us a call today, to see what we can do for you and help you buy your next van.
Van Finance FAQ's
What type of vans can we arrange finance on?
Crew vans and minibuses
Can I finance a second-hand van?
Yes, we can arrange second-hand Van Finance, if you’d rather not go for a brand new one. We can also arrange finance on a van you already own, if you want to release cash without selling it.
What makes and model of van can you buy with our finance facilities?
The short answer is, any make or model you like will be accepted by our finance lenders.
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