Van lease purchase is for business users, the whole of the VAT is paid at the start of the agreement and then can be re-claimed in the 1st quarter after your contract is made ‘live’, assuming you are VAT registered! This means the monthly payments DO NOT attract VAT.
You could also agree a ‘balloon or end payment’ this would be made at the end of the agreement so that you can take ownership of the van, the point of doing this would be to make your monthly payments more affordable.
This is an agreement between the business user and the van lease purchase company, All van lease purchase agreements are subject to a credit search.
There are lots of finance options to choose from with van lease purchase is NOT as popular as others, such as van Finance Lease.
One of the main positives of van lease purchase or HP, is the fact that the van (asset) will be shown on your balance sheet – so giving you an asset that you can write down every year.
The way van lease purchase works:
If you decide to take the ‘balloon/end payment’ route you would state your expected annual mileage, the van lease purchase company then works out the expected ‘residual’ value of the van at the end of the agreement, the interest of the ‘loan’ is added to the cost of the van, your deposit is deducted, the ‘balloon/end payment’ is taken of then the remaining figure is divided equally between the amount of months you have decided to take the contract over,
usually between 24 and 60.
If you are not taking the ‘balloon/end payment’ option the whole of the cost + interest – deposit is divided between the amount of months you have agreed to take the contract over.
At the end of the van lease purchase period you would own the van. Should you wish to end the agreement early, you can sell or part exchange the van as providing the full settlement figure is paid. If you don’t sell the van for the outstanding amount, you will have to pay the shortfall.
Some advantages of a van lease purchase agreement:
1.VAT down as deposit
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 (new vehicles and used vehicles up to 12 months old)
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.Changing your van on a regular basis.
8.You can show the van as an asset on your balance sheet
9.Easier to obtain credit than on other finance agreements like Contract hire
10.Full write down allowance
11.Tax benefits on the ‘interest’ proportion of the loan.
12.So now you can see why van lease purchase can also be an appealing method of funding.