The traditional way small businesses have paid for a new van has been hire purchase or lease purchase. But one might have noticed there are some good van leasing deals around.
So what about these? Van leasing is often used by bigger van fleets, so why shouldn't one consider it too for their SME van operation?
Hire purchase (HP) is a useful way to get a new van, but there are advantages to business van leasing.
Van leasing advantages
With a business van lease one doesn't own the van – they lease it from the finance or contract hire company, then at the end of the term hand it back (subject to wear and tear conditions which they need to be sure about before they undertake a business lease). So no selling the old van.
Van leasing also provides them with another line of credit without drawing down large chunks of their operational cash, which could be used to fund growth of their firm. Or simply ensure they have enough cash in the bank for day to day operations.
A van lease also allows one to budget their monthly costs and smooth out any stressful financial spikes.
They will be subject to a credit check but these are usually swift – they will in most cases have to show a trading record to prove their creditworthiness, so expect this. Key assessment factors include the ability to repay the borrowings, the strength of customer base or contracts, the industry sector in which you operate, and their financial track-record.
According to finance company Lombard, typical agreement terms had not changed much in the past two years, however two distinct segments have polarised. For logistics and contractual work, both operators and lenders have looked to match terms while own account operators have usually kept to their original replacement cycles depending on assets – vans, trucks and trailers at three, five and seven years respectively.
So for people thinking of renewing their business van – or some of the company vans on their fleet – here's some company van advice: they can have a think about their method of business van finance. It helps smooth their company finances during this economic period when money is tight