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This does not constitute a quote, it's for illustration purposes only. Rates may vary depending on loan amount and individual circumstances.

Benefits of Hire Purchase Van Finance Over Contract Hire

Rather than pay for a van out of savings most businesses would prefer to keep their cash in case of an opportunity or emergency that arises.  With hire purchase van finance you can arrange a fixed term, a fixed interest rate and fixed monthly repayments, allowing you to budget your monthly overheads and keep control over cash flow.

There are no mileage restrictions, so there are no penalties for excessive mileages at the end of the term unlike a contract hire agreement. In this case you may be charged 10 pence per mile for every extra mile over the agreed annual mileage.

Deposits are generally much lower than lease agreements where you might have to make 6 payments up front. Deposits on van finance can starts from as little as nothing depending on the van you choose and depending on your credit history.

Under the consumer credit act of 1974 you also gain extra consumer rights that you would not get if you take out a personal loan or bank loan. This means that should you have a problem with your van and the seller will not resolve it, you are entitled by law to approach the finance company for help.

With a hire purchase agreement you gain ownership of the van and are able to offset your new asset against taxable profits. This capital allowance currently allows you to offset tax against a 25% write down of your van on a reducing balance but do check with your accountant to check current guidelines and get specific advice for your business.

At the end of the agreed term, which is generally 2-5 years, you will own your van instead of handing it back to the finance company for them to benefit from its retained value.

How does VAT on vans work?

If you are VAT registered and there is VAT included in the price of the van, you should be able to claim it back at the end of your vat quarter, again check with your accountant to be sure.

Why is there no VAT on some vans?

This is determined by the previous owner;

If the last person or company to own the van paid VAT when they purchased it and claimed the VAT back from the tax man, then they are obliged to charge VAT on the selling price when they dispose of it.

If the last owner was not VAT registered then they could not claim back the VAT element of the purchase price and therefor are unable to charge VAT when they sell it on again. If this was the case then this particular van will never attract VAT again regardless of whether the next owner is VAT registered or not. This is because if VAT is not charged by a seller then there is clearly nothing to claim back from the tax man even if you are VAT registered.

In Summary

Hire purchase van finance can be very easy to organise, deposits kept low with fixed repayments enabling companies to budget their finances and to increase cash flow which could be useful for expansion or other important overheads.

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