Is it better to buy or lease a van for your small business?

Buy or lease a van – the main differences

When you buy a van, you can do this by paying all the money upfront or with the help of a loan. With a loan, you’ll eventually own it.

On the other hand, when you lease a van, you’ll never own it. Instead, you’ll pay a monthly fee in order to use it, usually for two or three years. When the agreement ends, you’ll hand the van back.

You can also get ‘lease to buy’ agreements. In this case, you’ll lease your van like normal. Then, when your agreement comes to an end, you’ll have the option to make a one-off payment to buy the van instead of handing it back.

Whichever option you go for, it will be a significant business decision. Not just is a van is likely to be a major item of capital expenditure. You’re also probably going to spend a lot of time in it. The Federation of Master Builders estimates builders will spend 2.5 years driving their van over their working lives

What are the pros and cons of leasing a van for business?

Thinking about leasing a van for your small business? Wondering the best way to buy a van when you’re self-employed? Check out these pros and cons for help in making your decision. You can probably find a cheap van lease with no deposit if you shop around. There are also van leasing tax benefits to consider. These could be significant for a small business.

Benefits of leasing a van for business

• Fixed monthly cost – Paying a set cost each month can make budgeting easier
• Drive a new van – You’ll get to change your van every few years, so you’re always driving a new model. This is also likely to lower your vehicle’s running costs
• Won’t depreciate – When you buy a new van, it will quickly depreciate, whereas when you lease one, you won’t be stuck with a depreciating asset
• Tax deductible payments – lease payments are business expenses that you can use to reduce your taxable profits
• Van tax – Van tax is often included in your lease
• Maintenance packages – Lots of lease agreements include great deals on maintenance packages
• Extras – Some lease agreements come with extras, like breakdown cover
• Upfront cost – You won’t have to pay as much upfront as you would if you were buying a van outright

Looking to save money on leasing a van? Check out our guide to the best van lease deals.

Disadvantages of leasing a van for business

• It can’t be sold – You won’t own your van, so you can’t sell it to make some of your money back
• It has to be returned – Your van will have to be returned at the end of your lease (unless you ‘lease to buy’)
• Mileage limit – You’ll have to predict how many miles you’re likely to drive, known as your mileage limit. Going over this will come with extra costs
• Credit history – You won’t be able to lease a van without a good credit history behind you
• Modifications – You won’t normally have the freedom to make major van modifications
• Charges for damage – If the van is damaged when you return it, you’ll need to pay a charge

If you’re interested in leasing a van for your business, learn more about how Checkatrade can help you get the best deals.

Why one Checkatrade member chose to lease a van

Pros and cons of buying a van

Now you know the advantages and disadvantages of leasing, you’re probably wondering how they compare to buying a van, and the best way to buy a van when self-employed. Here are the main pros and cons of buying a van to help.

Benefits of buying a van for your business

• You own it – It sounds obvious, but you get to keep the van! This also means you can sell it to get some money back if you don’t want it anymore
• Negotiate – If you’re paying cash, you might be able to get your van for cheaper by negotiating and haggling
• No monthly payments – If you pay for your van upfront, you won’t have any monthly payments to worry about
• Maintenance – It’ll be your choice as to what standard you want to maintain your van to, as long as it passes its MOT
• Cost – Buying a van is likely to work out cheaper in the long run than leasing – especially if you keep your van for a while
• Transporting equipment – Some lease agreements require any damage to the van (like bumps and scratches caused by plant and equipment carried in the back) to be paid for before the end of the lease contract
• Unlimited mileage – You can drive as much as you need if you own your van
• Modifications – If you own your vane you can make modifications if you want, including a van wrap to make it stand out
• Van tax – This is a tax-deductible business expense

Disadvantages of buying a van for your business

• Repairs – You’ll be solely responsible for the cost of repairs. These costs are likely to get higher as the van gets older
• Depreciation – Your van will gradually lose its value over its useful life
• Upfront cost – Buying a van comes with a hefty upfront cost, unless you use van finance – in this case, you’ll need to pay a deposit and make monthly payments
• More admin – You’ll be solely responsible for maintaining and taxing your van, and will need to sort any extras out, like breakdown cover, yourself
• Dispose of it – If you don’t want your van anymore, you’ll need to sell or dispose of it yourself

Van leasing tax benefits

Whether you’re a sole trader or you run a business, you’ll be able to claim some travel costs as business expenses – including your van!

You can head to Gov.uk for a comprehensive list of allowable travel expenses for the self-employed.

Is buying a new van tax deductible?

Yes! If you’re buying a new van for your business, you can offset the cost against the amount you pay tax on.

Depending on your situation, you’ll be able to deduct all or some of the van’s value from your profits, so that you pay tax on less.

Is van leasing 100% tax deductible?

It can be! If your business is VAT-registered and you’re leasing your van for business use only, you can claim up to 100% VAT back on your monthly payments.

Plus, in the same way, as if you were buying a van, you’ll also be able to claim your monthly payments as a business expense when you file your tax return.

What’s the best way to buy a van for self-employed tradespeople?

If you want to buy a van rather than lease one, you’ll be able to choose whether to buy it outright or on finance.

Buying a van on finance means you’ll pay for your van in small instalments, usually over the course of a year or more. You might think that this sounds similar to leasing a van, but when you buy a van on finance, you’ll still become the owner.

The main benefit of buying a van on finance is that you won’t have to fork out the full cost of the van upfront, which can be prohibitive for many business owners. This also means you’re more likely to be able to afford a more expensive vehicle – like an electric van – which could help you to create a better impression with your customers or allow you to buy a more reliable vehicle.

On the other hand, although buying a van outright comes with a significant initial outlay, it will mean you’ll pay less for your van overall. This is because you’ll avoid paying interest. Plus, you’ll be able to sell your van at any point if you decide you no longer want it. If you’ve bought your van on finance, you won’t usually be able to sell it until the repayments have all been made.

Ultimately, there’s no best way to buy a van if you’re self-employed. The right decision for you will depend on whether you can afford the van you want upfront or whether spreading out the payments over a longer period of time sounds appealing.

So, should you buy or lease a van for your business?

If you’re still not sure whether you should buy or lease a van for your business, consider what your priorities are.

If you’re most concerned about cost in the long run, you might prefer to buy your van outright – this is generally the cheaper option overall, especially if you can part-exchange an old van and haggle on price. And especially if you intend to keep your van for a long time.

On the other hand, if you like the idea of trading your van in for a brand new one every two or three years, leasing your van could be an affordable way to do so. Plus, you might like the idea of having a regular monthly cost that can include maintenance packages –  that way, you’ll know exactly how much you’re paying each month without having to worry about nasty surprises!

Similarly, consider how you’re going to use your van. Lease agreements usually come with mileage limits, and will often prevent you from modifying your van. On the other hand, if you buy a van outright, you’ll have the freedom to use it how you want.

Ultimately, it all depends on what you want from your van, and what’s most important to you and your business!

FAQs

Can I get cheap van leasing with no deposit?

Van leasing is a fairly competitive market. There are lots of companies offering van leasing deals that change all the time. These can include cheap van leasing with no deposit. So, it’s always worth shopping around for a deal that suits you.

Does leasing a van include insurance?

Leasing a van doesn’t usually come with insurance. However, some leasing agreements do have a built-in van insurance policy. Just make sure to check the wording to make sure you’re actually covered for everything you need.

What are the van leasing tax benefits?

The monthly payments you make on a van lease are tax deductible, so you can use them to reduce your taxable profits.

Should I buy or lease a van as a sole trader?

There are lots of advantages to leasing a van. The main one is that you’ll be able to trade your van in for a new model every two or three years. Not only can this help to give a good impression to your customers, but new vans will also generally have lower running costs.