Contract Hire vs Buying a Van: Pros and Cons
If you’re deciding whether to contract hire or buy your next van, it’s important to be aware of the advantages and disadvantages of each option. Here, we’ve outlined the pros and cons of both contract hire and buying a vehicle to help you make an informed decision.
Pros of Van Contract Hire
Contract hire can offer a number of benefits. The monthly payment is typically lower than taking out a bank loan. This can make it a more affordable option and the monthly cost is fixed for the length of the contract, so you won’t have to worry about any unexpected expenses.
Contract hire allows you the option of replacing it with a new one every two to four years, depending on the type of contract. This means you can drive a newer model without having to worry about selling your old one.
Another advantage of contract hire is that the vehicles are new so the manufacturer’s warranty is included, meaning you won’t have to pay for any costly repairs during the term of the lease.
Finally, If you lease a vehicle through your business, there may also be tax benefits.
Cons of Contract Hire
Good credit history is important to get approved for a lease, which means that people with bad credit may not be able to take advantage of this option.
You won’t own the van at the end of the contract and you must pay all monthly payments and will be tied in until the end of the contract.
Finally, your annual mileage is limited to the amount specified in your contract, and if you exceed this, you’ll have to pay an excess mileage charge.
Pros of Buying a Van
Buying a vehicle outright or on through finance has several advantages. Firstly, at the end of the contract, you own the vehicle, which means you can sell it at any time, trade it in for a new vehicle, or keep it for as long as you want.
There are no mileage restrictions, you can drive as much as you want without having to worry about additional charges.
Overall, buying a van gives you more freedom and flexibility than contract hire, which can be a big advantage for many people.
Downsides When Buying a Van
The biggest disadvantage is that the van will depreciate in value over time, which means that it won’t be worth as much as you’ve paid for it.
Additionally, you’ll have to pay for all servicing and repair costs, as well as the MoT test when the van falls liable, which can be expensive.
Another disadvantage, if you don’t have the cash to cover the purchase, monthly payments on a bank loan are normally higher than contract hire, which means that buying a vehicle can be more expensive in the long run.
When deciding whether to lease or buy your next van, it’s important to consider the advantages and disadvantages of each option. A contract hire van can offer lower monthly payments, the option to replace the vehicle every few years, and options to include servicing. However, it also has its drawbacks, such as the requirement for a good credit history and the potential for costly repairs if the vehicle is damaged.
On the other hand, buying a van gives you the freedom to sell or trade it in at any time, with no mileage restrictions. However, it also means taking on the cost of servicing and repairs, as well as the potential loss of value over time.
Ultimately, the best option for you will depend on your individual circumstances and needs. Weighing the pros and cons of both contract hire and buying can help you make an informed decision.