Finance Options Explained: Ways To Pay For Your New Van

By Absolute Vans on August 29, 2017 | Resources

Purchasing a new van can often be a big decision. From selecting the right manufacturer and model through to getting the appropriate optional extras, there’s a lot to think about. And that’s before you even consider your finance options.

The Absolute Vans experience is designed to make the purchase of your new van as clear and simple as possible. That’s why we have created this plain English guide, summarising each of the finance options we offer, so you have all of the information you need to make an informed decision.

We offer our customers four key ways to pay for any new vehicle: finance lease, hire purchase, contract hire and outright purchase. Whilst some of these options are similar, they each have notable differences which are important to understand.

Finance Lease

In the most basic of terms, a finance lease will see a finance company buy a van on your behalf, before renting it to you for a fixed period of time.

Finance leases come without mileage restrictions, meaning that you’re free to drive your new van across any distance without worrying about the mileage you’re accumulating. This isn’t the case with some other kinds of finance.

Fixed monthly payments are common with a finance lease, with the option for a flexible initial deposit. These monthly payments can span across a term of up to 60 months. If the finance lease is taken out by a VAT-registered company, the VAT on monthly payments can be reclaimed. As a finance lease is a form of rental, it is 100% tax allowable.

Finance lease agreements are offered both with or without balloon payments, with the option for early settlements and renewals.

Selling after a finance lease, you may be able to retain up to 100% of the equity from the sale, with part-exchange equity being accepted as a deposit.

Hire Purchase

A hire purchase agreement is essentially a loan, secured against the value of your van, paid off across its lifetime.

A hire purchase gives you access to a new van with monthly payments for up to 60 months. These fixed payments are set depending on how much you put down as a flexible deposit, which can be made up with part-exchange equity.

Hire purchases are available with or without balloon payments, but you will always be the owner of your van at the end of the agreement. This means that any equity held within the van can be used as part-exchange towards a new vehicle.

100% of interest charges can be offset with a hire purchase, whilst write-down allowances may be available.

Contract Hire

A contract hire is taken out as a form of finance with a fixed mileage agreement. This means that, unlike some of the other forms of finance we offer, you must consider the mileage you expect to accumulate with a contract hire agreement.

The initial deposit on a contract hire agreement is flexible, and monthly payments are of a fixed amount. The VAT on these monthly payments is reclaimable if the agreement is taken out by a VAT-registered company.

As a rental agreement, vans purchased through contract hire are 100% tax allowable.

If you have passed over the agreed mileage, or if the van is not in an acceptable condition, additional charges are payable at the end of a contract hire agreement. This means that ensuring that your contract hire van is taken good care of is vital.

The vehicle is returned to the finance company at the end of a contract hire agreement.

Outright Purchase

An outright purchase is where a van is sold directly to you, without the input of a finance company. With an outright purchase, you own the van from day one. This means that there are no monthly payments, no mileage restrictions and that you have no further contractual obligations.

In Summary

The finance options we offer are varied, with each catering for different needs. It is important to understand your options before coming to an independent decision. We provide this information as a basic guide to each finance. Individual circumstances vary. You should always seek professional advice when acquiring a new vehicle.

For a visual overview of these finance types, download our quick finance guide.

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