Quick Van Finance Guide

Quick Van Finance Guide

There are a whole range of options available to pay for a used van with pros and cons totally depending on your requirements, your finances and whether you want to just hire a used van over several years – or want to end up ultimately owning it. And remember, for accurate guidance about your own circumstances, you should always consult your accountant. So, on with the guide. The most popular types of finance available include:

Contract Hire – This is leasing in its simplest form. You pay a monthly fee for the van and then at the end of the agreement you just give it back. No depreciation worries. No final balloon payment. It’s that straightforward. Plans usually range from 1 to 5 years. But… you will usually have to estimate the mileage you’ll cover over that time  – and there’ll be a penalty charge if you go over that figure.

Hire Purchase – The clues in the name and the key difference here is that you end up owning the van. A small deposit is usually required up front  Then it’s monthly payments for the agreed time and it’s all yours at the end. This is an easy way to spread the cost of buying a van outright but obviously you’re paying interest so it will work out more than paying cash for the full amount and owning the van from the get-go.

Personal Contract Purchase (PCP) – PCPs have become a very popular way to fund a vehicle with relatively low monthly payments compared to some other options – but you’ll need a pretty good credit score. A fixed payment each month basically covers the van’s depreciation with payments based on your van’s Guaranteed Future Value (GFV) when the contract ends. Basically, you are paying the difference between your van’s current price and the GFV. When the payments end, you can settle the balance and own the van – this is called the balloon payment. Or you can give the van back or part-exchange for another van. As with Contract Hire you have to estimate mileage and there are penalties if you miscalculate this.

Answers to a few key Finance questions

Choosing finance is a big decision and naturally throws up questions and concerns.

What if I’m a sole trader or a new business?
Being a sole trader or a new business doesn’t mean that you can’t apply for finance – but you’ll still have to go through the usual credit checks and demonstrate the ability to make the monthly payments.

Can I get finance if I’m not VAT registered?
Yep! Not being VAT registered will not affect your eligibility, but obviously you will be missing out on the financial benefits of being registered. For more information take a look at our Vans and Taxation Guide.

Will bad credit stop me getting finance?
Not necessarily. You’ll have to look harder, but there are more and more finance businesses offering products for people who have run into financial trouble.

One final and important point!  Whatever you opt for always check the APR (Annual Percentage Rate) and the total cost to pay. You can use comparison sites to make sure you are getting a competitive deal. And one last reminder, before committing to anything, always double check with your accountant!

When you want extra guidance, feel free to talk to our specialist dealer partners. They supply thousands of vans every year and with all their experience they’ll always be happy to help.

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