Leasing can be a cost-effective and hassle-free way to drive a brand-new van.
Our definitive guide to leasing a van will show you how it all works, how to choose the right van for you and what to look out for.
What is van leasing and how does it work?
Van leasing is a type of finance that works like a long-term rental agreement. For a low monthly cost, you have the full use of a van for a set period of time.
At the start of the lease contract, you can pay an initial rental – much like a deposit – and then cover a series of monthly payments, usually over the course of two to four years.
When the contract ends, the van is handed back and you’re free to either walk away or choose your brand-new van lease.
Advantages & disadvantages of van leasing
Over the last few years, van leasing has grown increasingly popular. However, there are always advantages and disadvantages to any financial decision, so it’s worth weighing them up before going ahead.
Advantages of van leasing
Low deposit and predictable monthly costs
With a lease agreement, you’ll always have fixed monthly costs that you can work into your budget. Also, all our vans come with a £0 deposit option.
Get a brand-new van
If you like the idea of changing your van often or need flexibility for work, leasing is a good option.
At the end of your agreement, you hand your van back and can upgrade to a new model. There could even be flexibility to upgrade earlier too, depending on the agreement terms.
Can include maintenance and repair costs
With many van lease deals, you can add a maintenance package, which means you don’t need to pay out for costs such as servicing, maintenance, or tyre replacements.
Avoid depreciation worries
Leasing a van means you don’t have to worry about the risk of depreciation over the term of your agreement, as when it ends you won’t have to sell it and can just hand it back.
No responsibility of ownership
With a lease, because you never own the van, you’ll have less risk than you do with ownership, such as concerns over servicing, depreciation or even trading in.
Wide range of makes and models available
When it comes to leasing, there’s a huge range of makes and models to choose from, some which may not usually be within budget thanks to low leasing costs.
When leasing a van for business, an added benefit is that you can make savings by claiming the VAT back on your monthly payments and maintenance package (as long as you’re VAT registered).
Disadvantages of van leasing
You won’t own the van
Leasing is more suited to those who like the idea of a new van every few years or businesses that like to regularly update their fleets. With a lease, you’ll never own the van.
At the start of your lease deal, you’ll need to agree a set annual mileage. If you exceed this annual mileage amount, you’ll be hit with sometimes costly penalties at the end.
Following the end of the contract, the van is checked to see if there are any repairs needed. Anything above standard wear and tear could land you with additional charges.
As the van is not your property, generally, any modifications won’t be allowed without the permission of the lease company. Signage is possible if it’s removed before the van is returned.
It will cost to terminate early
While an early upgrade can be a possibility, if you want to cancel your agreement early, there’ll be a cost.
Who can lease a van?
Leasing can work for both businesses and individuals. So, whether you’re a business sourcing a larger fleet, a mid-size enterprise, a tradesperson or a self-employed handyman, it can be a viable option.
To lease a van, a credit and affordability check will be done. However, here at Hippo, whether you have excellent or poor credit when it comes to van leasing, all circumstances will be considered to try and get you the best deal.
What’s included in a van lease?
As you typically get a lease on a brand-new van, you’ll have the benefit of full manufacturer’s warranty on the vehicle, as well as road tax for the length of the lease.
Some lease packages include breakdown cover for the first 12 months, too.
If you opt for a maintenance package, you’ll also receive servicing, MOT (if you’re leasing the van for more than 36 months), replacement tyres and breakdown recovery service for the length of your contract.
What are the other types of van finance?
There are a few different types of lease you can choose from with van leasing
Business or personal contract purchase (BCP/PCP)
Under this type of lease agreement, there’s more flexibility when the finance agreement comes to an end.
With BCP or PCP, you put down an initial deposit – if you want to make one – followed by low fixed monthly payments for two to five years.
When the contract ends, you can either hand the van back, part exchange the van or pay a one-off lump sum (balloon payment) to keep the van.
Lease purchase works similarly to a lease. You place a deposit – if you want to – on the van (or fleet) and then pay a series of monthly instalments over an agreed period of time.
However, when the contract comes to an end, rather than simply hand the van back, you have to pay the balloon payment and take ownership or look to part exchange it.
Hire purchase (HP)
With hire purchase, you put down a deposit and then pay a set monthly payment over an agreed period in return for an individual van or fleet.
When the term of the agreement is up and all the monthly repayments have been made, you own the van.
Van leasing vs buying a van
When you buy a van you can either pay for it outright and own it straight away or spread the cost with a finance deal.
If you’re looking to own the van outright, buying it with cash is undoubtedly the cheapest option. However, you need to factor in the large initial outlay and it obviously comes with all the responsibilities and costs of van ownership.
Leasing a van can be more flexible, as you don’t own the vehicle.
Instead, you pay low monthly payments over the course of two to five years in exchange for using it.
When the lease is up, you can hand the van back and walk away. Then you’re free to pick a new van and start a new lease deal.
This makes it ideal if you like the idea of owning a new van for every few years or if it benefits your business to refresh your vehicle.
How does van tax work?
When you lease a van, you have to give it back at the end of the contract. This means, for the duration of the lease, there’s no effective ownership of the vehicle by you or your business.
This means you could take advantage of tax benefits.
You may be able to reclaim 100% of the VAT costs, depending on if you’re using the van solely for business use or not.
And f you’ve opted for a maintenance package, you could also be eligible to claim back the VAT, as well as any excess mileage fees you are charged for when the contract comes to an end.
What happens at the end of a van lease?
At the end of your van lease, you simply hand the vehicle back and walk away.
Before you do, though, it’ll be checked to ensure the terms of the contract have been adhered to. This includes checking for excess damage outside standard wear and tear.
The mileage will also be inspected to ensure you’ve stayed within your agreed terms.
If the mileage has been exceeded or there’s significant damage to the van, you’ll be expected to pay charges before the contract can be ended.
In terms of mileage, this is usually a pence-per-mile charge which can be found in your agreement.
Can you lease a van with bad credit?
If you’re looking to lease a van but have financial difficulties, you may be worried it could affect your application.
Before you’re approved, your lender will assess your credit file and score and make a decision on your credit history.
If it’s a business lease, it’s a similar process. Lenders will take into account the financial history of the business, like how long it’s been around, its cash flow and general financial stability.
We understand that not every business or person has a perfect credit history. Which is why we work with lenders who specialise helping those with less-than-perfect credit.
Plus, all our initial checks are soft, meaning they don’t appear on your credit file, and we can find the right lender for you without harming your score.
It’s easy to see if you’ll be approved and it only takes a few minutes. Just click Apply Now.Apply Now
How to choose the right van?
Choosing the right van can be a difficult task, especially if you’ve never had one before.
To ensure you make the right choice, think about the purpose of the van, what you’ll be transporting, and where.
Your first decision to make when it comes to choosing the right van is the size. And that depends on your day-to-day business needs.
What will you be carrying in your van?
If you need it to transport supplies or goods, consider the weight of your average load to decide on the payload.
Another size consideration is how many seats you’ll need. Is the van just for you or will you have co-workers with you? Or will you be using it as a family vehicle, too?
It’s important to get a van big enough for both comfort and practicality.
Next, you need to consider the functionality of the van.
If you’re transporting heavy loads, will you need access for a fork-lift truck? Are there any restrictions to where you’ll be working, such as narrow streets or height restrictions?
If so, maybe a van with sliding side doors for curbside loading would be best.
Do you have any other special requirements? For instance, if you’re transporting food goods you may need a van with temperature control.
If your business requires short stop-offs around the city, it will put very different demands on a van to those doing long motorway hauls.
So thinking about the type of journeys you’ll need to make is vital when choosing a van.
If your business requires short trips, but more often, a smaller economical van would probably suit you best. Perhaps even an all-electric van.
More frequent longer journeys, and you may want to factor in the fuel running costs of the van too.
What are the different types of van?
If you haven’t leased a van before or your business needs have changed, at Hippo, we have a huge range of vans – both new and Approved Used – available.
How much does it cost to run a van?
The costs of running a van depends on a number of factors. The type, age and size of the van all play a part, as well as the method of purchase or lease.
On top of this, there are fuels costs to consider, insurance and tax.
When you lease a van, you have an advantage that some of these costs can either be reduced, fixed, or even included.