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Van Finance Lease

Van Finance Lease for vans is for ALL business users who want to keep their monthly payments low, by spreading the payments over 3-5 years, you can ‘cheapen’ them even more by having a small end payment also known as ‘balloon payment’.

This type of Finance agreement is between the business, sole trader or partnership and the van finance lease company, all van finance lease agreements are subject to a credit search.

There is a lot of ‘inconsistent information’ given regarding the balloon/end payments, so let me tell you that this HAS to be paid, it can be done in a number of ways:

Pay out of your own bank

Sell the vehicle and pay the balloon off

P/X the van where the ‘p/x monies’ pays the balloon off

Refinance the balloon

Hand back to the van finance lease company – I would never advise customers to do this route, the finance companies sell the vehicle, usually at auction and whatever they get goes to pay the balloon payment off, if its short they ask you for the difference!

Once the end payment has been paid, you still do not own the vehicle as the vehicle must be sold to a ‘Non Related’ third party. This is where the van finance lease company would charge sale of proceeds on the value you sold the van for which currently can be between 2 and 10%, depending on the finance company.

There are a number of finance options to choose from with van Finance Lease being the most popular one for small businesses. One of the main reasons van Finance Lease is so desirable is that you can change your van for a new one without the large outlay of a big deposit. Most ‘deposits’ or ‘initial payments’ can be as little as 1 month’s payment.

How you monthly payments are worked out:

You state the expected annual mileage at the start of your contract, the van finance lease company then works out the expected ‘residual’ value of the van at the end of the agreement, which will be your end payment. (Basically what they think the van will be worth for the age and mileage at the end of the contract). They then will minus this end payment and divide the remaining balance of the purchase price by the amount of months you wish to lease the van for.

Advantages of a van Finance Lease agreement are listed below.

1.Flexible deposits

2.Contracts that can run 24 months to 60 months

3.Bolt on Maintenance & Service packages – these include all servicing (in accordance with manufactures guidelines), tyres, batteries, exhausts and basically anything that is not covered under the warranty

4.No annual mileage limitations

5.No wear and tear charges

6.Ability to claim a 100% of the VAT back, assuming your VAT registered make sure you check with your VAT advisor

7.You can show the van as an asset on your balance sheet

8.Easier to obtain credit than on other finance agreements like Contract hire

So now you can see why van Finance Lease is such an appealing method of funding and why so many small businesses chose this route.