There are a number of different ways to finance a deal on a new van which include: van lease, personal contract purchase, van contract hire, lease purchase and van loans. The variety of vehicle financing options available today can be confusing so I thought I would focus on ‘contract hire’ and explain how this technique works.
Leasing a van basically takes vane of one of the biggest financial issues associated with acquiring a new vehicle which is depreciation. As soon as you’ve been handed the keys to your brand new motor its value falls through the floor.
When you take out a van lease the residual value of your selected vehicle is calculated. This is the estimated value of the vehicle at the end of the agreed lease period based on the anticipated mileage during this time. This calculated residual value is then deducted from the manufacturers retail price and the remaining sum is divided up into monthly payments that you will pay over the lease period. So the higher the residual value as a proportion of the current value, the less you will need to pay each month.
Contract hire is a vehicle financing method that has maximum benefit for customers who are registered for VAT, so it is most suitable for businesses and the self-employed. If your vehicle is used exclusively for business purposes you will be pleased to find that you can reclaim 100% of the VAT. Even if you use your van or van for some personal use you can still reclaim 50% of the VAT.
A contract hire agreement means that you have actually hired the selected van or van for an agreed period, usually between 1 and 5 years, during which time you will pay the agreed rental, based upon mileage. At the end of the agreed contract hire period, as in the case of van leasing, the vehicle is returned to the supplier. You will not be surprised by any unforeseen disposal or depreciation costs.
Van Contract hire will generally include full vehicle maintenance which can optionally include routine servicing and even replacement tyres. Up to 100% of the rental charges can be offset against taxable profits and minimal capital outlay is required.
It’s therefore no surprise that contract hire is the favoured financing option chosen by many businesses and self-employed people.
I am often asked whether these types of deals are extended to pick up truck leasing or small van leasing, as opposed to just van leasing. Yes, is the answer, with a host of competative pricing waiting to be discussed by Mark Williams.
For commercial vehicle leasing I would recommend Mark Williams Vehicle contracts.
