Cars are the most commonly leased type of vehicle, and this is what we tend to think of first when we are discussing leasing. However, in recent years van leasing has been on the rise and this is a fantastic option for a wide range of people. Leasing a van typically works in the same way as leasing a car, but there are a few key differences that you will need to take into consideration before signing a van leasing, or business vehicle leasing, agreement. In this article, we will be taking you through exactly how van leasing works, so you can make an informed choice about whether this is right for you.
Van Leasing Options
If you are looking to lease a van, you will be happy to hear that there are plenty of different options out there for you, so you can choose the one that is best suited to you and your business.
One of the most popular types of van leasing is finance leasing. With this type of leasing contract you will be paying a fixed monthly payment over a length of time that will be pre-determined at the beginning of your contract. This could be anywhere from one year to five. At the end of your contract period you will have one final payment and this is known as a balloon payment. This final payment is larger than your regular monthly payments and the amount that you have to pay will have been decided with the company you are leasing from at the beginning of your contract. It is entirely up to you whether you want to opt for higher monthly payments to reduce the balloon payment fee at the end, or you have lower monthly payments and a larger lump sum to pay at the end of the agreement.
You can click here for van finance examples that will give you a good idea of how much you will need to pay. Both have pros and cons and ultimately it is up to you to decide which one is best for you. Whichever you choose, your business purchases the vehicle at the end of your contract and takes full ownership.
Another form of van leasing that you can opt for Is peppercorn rental. With this type of leasing contract, you will start with the same type of contract as previously described, however, instead of paying the balloon payment you will instead carry on paying the monthly instalments but in a yearly contract. This allows you to continue using the vehicle for another year. You can carry on doing this as long as the business providing your finance agrees to it, but it is important to remember that you will have to pay off the balloon payment eventually.
Finally, a very popular van leasing contract option is contract hire. This is one of the most common forms of van leasing and tends to be one of the most popular agreements. This is similar to finance leasing as you will be paying a monthly payment that is fixed for a predetermined length of time – this tends to be around two years with van leasing. However, the big difference with this type of leasing is that at the end of your contracted time, you will not have to pay a balloon payment and you will not own the van. Instead, you will simply hand the van back to the leasing company and you can then decide whether or not you want to take out a new contract.
Are There Tax Benefits to Leasing a Van?
When you are leasing a car through your company, you normally have to pay company car tax. However, the rules with tax and van leasing through your business are slightly different. With company car tax, the amount that you pay is based around how much CO2 your vehicle emits, but with vans there is a set rate across the board, assuming you use the van for personal use beyond just going to and from work. This ‘benefit in kind’ rate is set at £3,350, and how much you pay in tax is calculated using your personal tax rate; if you are in the 20% personal tax bracket then you will be paying 20% of this BIK rate, or £670.
There is one exception to this rule and this is for vans that have zero emissions, where the BIK rate is set at a lower £1,340, meaning a tax bill for those paying 20% of £268. With many people facing increased bills thanks new company car tax changes, having a fixed tax rate is a very attractive offer.
Now that you know how van leasing works and the different types of van leasing that are available to you, you can make an informed choice about which type of leasing is going to be the best for you.