Honest John:
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When you need a new van, there are many decisions to be made, but prime among these will be how you pay for it. The traditional route of buying the van outright with cash or a bank loan has long been supplemented with two more versatile and lower cost options: contract hire and leasing. We'll look at the benefits and drawbacks of each of these in turn.
Let's start with the tried and tested route of buying your next van outright. It's often said you should only buy something that will appreciate in value, while anything that depreciates should be leased. It's sound advice in lots of ways, but many businesses still like to own their van outright, especially small businesses or sole traders where the van is their most important work tool.
One of the key advantages to owning a van outright is you then have no additional outgoing payment, or a fixed cost to repay the loan used to buy it. This makes it easy to budget over a long period. Also, a new or nearly new van with will come with a full manufacturer's warranty that guards against any problems with the van.
A further advantage is you can do what you like with the van without any restrictions, so if you cover a very high mileage there are no additional costs other than servicing and fuel. You can also specify the van to your needs and tastes, and even have it sign written in whatever fashion you like.
Financially, owning your van means you can offset only the capital allowances against tax if the van is only used for business purposes and not personal use. If the van was bought using a bank loan, the interest charges can be reclaimed against tax too. All of the van's running costs can also be offset against tax when it's only used for business. You can also claim your own capital allowances and you don't have to be VAT-registered.
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Auto Express:
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Undoubtedly the simplest and most obvious way of getting hold of a van for business use is to buy it outright.
The advantage of this is that it's then yours to do with as you wish; you have complete control. You can service it where you like, insure it with whichever company you wish, and keep it for as long or a short a time as you need - some or all of these areas might be subject to certain restrictions with lease or contract purchase agreements.
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Which
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Five ways to pay for your car
Pay cash
PROS The cheapest way to buy in the long term. No monthly repayments. Less paperwork to fill in.
CONS You must pay the full cost upfront. It could mean spending savings and losing interest. Cars depreciate - investing in an appreciating asset (such as your home) may be wiser if you can also afford to pay for a car on a monthly plan.
VERDICT The simplest and cheapest way of buying a new or used car, if you can afford it.
Bank loan
PROS Spreads the cost over time. You can shop around for the best loan. Often cheaper than dealer finance. You can still push for a 'cash discount'.
CONS Cost of credit varies widely. Difficult with a poor credit rating. As with cash, you bear the brunt of any depreciation.
VERDICT A sensible option if you don't have the means to buy a car in one go. Be sure to shop around, though.
Hire purchase (HP)
PROS You buy the car outright, in instalments. Easy to arrange via car dealer. You can return the car part way through the repayment plan.
CONS Can prove a lot more expensive than a bank loan. Servicing may cost extra - check the T&Cs. You don't own the car until the final payment is made - the car can be repossessed if you don't pay.
VERDICT A loan could save you £1,000s vs HP.
Personal contract purchase (PCP)
PROS Low monthly payments - you're hiring the car for most of the deal, with the option to buy at the end. You can get a new car whenever it suits you - even every year. Competitive deals.
CONS Servicing unlikely to be included. Mileage limits will apply. 'Balloon' payment at the end.
VERDICT A tempting way to drive a new car every few years, but don't forget the 'balloon'.
Leasing
PROS Monthly payments are low. Servicing is often included. It's easy to change cars, with no need to buy or sell.
CONS You don't own the car, no matter how long the lease. A large upfront deposit is usually required. There may be a mileage limit - with penalties if you exceed it.
VERDICT The most convenient way to drive a new car, but unlikely to be the cheapest.
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My opinion:
As with nearly everything, cash is the cheapest way to make a van purchase, and large discounts can be negotiated with the dearlership. Leasing is simply idiotic, although an easy way to have a new vehicle. It is just another way money is transferred from the plankwitted to those with more than an ounce of intelligence.
Leasing is nearly always a financial blunder.