Should I Buy or Lease a Van for My Business?

If you're concerned about the cost of buying a van, leasing it may be a more affordable option. We'll take a look at the pros and cons of each decision, so you can decide whether to buy or lease a van for your business.

What’s the difference between buying or leasing a van?

When choosing the best van for your business, you’ll want to consider the options of both buying or leasing your van. While both are excellent options for businesses, they each have their own unique benefits.

Buying a van for your business means that you own the vehicle, and you can do whatever you want with it. You can modify it, sell it, trade it in—whatever makes sense for your business.

Leasing a van is more like renting. You pay a monthly fee to use the vehicle, but at the end of your lease term (or earlier if you choose), you will have to return it.

Advantages of buying a van for your business

• If you buy a van, it's yours. You can customise it to make it look great, and then reap the benefits when you decide to sell it.
• If you buy a van outright, there will be no monthly payments to worry about.
• You can modify your van to better suit your business needs.
• If you are eligible, you can claim back the VAT on your next tax return.

Disadvantages of buying a van for your business

• The cost of purchasing a van is high and can impact your business’s cash flow. VAT must be paid up-front when purchasing a commercial van, whereas you can spread the cost with a lease or hire purchase agreement.
• If you buy a brand new van and drive it for a couple of years, it's likely that by the time you sell it, it'll be worth less than what you paid for it. This is because vans depreciate quite quickly.
• A deposit and monthly payments might be required if you buy a van with finance.
• It's your responsibility to pay for repairs, which will likely increase as the van ages.

Advantages of leasing a van for your business

• There are different lengths of leases, but you can generally renew your lease every three years.
• A lease arrangement involves a regular monthly payment and an affordable initial payment.
• Leasing a van means that its value doesn't depreciate.
• You can return the van at the end of your lease. You won't have to worry about finding a part-exchange value or selling your old van privately.

Disadvantages of leasing a van for your business

• Startup businesses or those with a poorer credit history may have difficulty leasing vans. However, this shouldn't stop you from applying. You can always submit additional documents to prove that you can afford to pay the monthly instalments.
• The van can only be driven a certain number of miles per year. You might be charged an extra fee if you exceed the mileage limit.
• Repairs for excess damage are often non-negotiable.
• Some modifications, such as signage or roof racks, are allowed under the lease. However, modifications that are irreversible are not allowed.

Is it more tax-efficient to buy or lease a van?

Buying a van has the advantage of being able to claim 100% of its cost as capital allowances. The full value of the van will be offset against your company’s profits, thereby reducing your corporation tax bill.

If you do not have the capital to purchase a van outright, leasing might be a better option for you. Despite not owning the van, you are still eligible to deduct the monthly cost of leasing your van against your profits as an allowable business expense. If interest is charged, the interest amount is also deductible. Like buying a van and claiming a capital allowance, you can still deduct the expense of leasing a van from your company profits to reduce your corporation tax.

Reduce your business costs with multi-van insurance.

If you're thinking about whether to buy or lease a van for your business, you might be wondering about the cost of multi-van insurance. After all, it can get expensive to have multiple vans on the road. But there's good news: with multi-van insurance, your business can save money without compromising safety.

Multi-van insurance from Bluedrop can help you save money by reducing the number of policies that need to be purchased. This can also help streamline your administrative tasks and make it easier to manage all aspects of your insurance needs. As experienced fleet insurance brokers with years of quality service to our name, we're dedicated to finding the right solution for you, offering excellent value at a reasonable price.