A van is a necessary investment for lots of different types of businesses. For small enterprises working on a strict budget, though, they need to know that they’re getting the best deal. There are a number of different methods available to you when it comes to financing a vehicle. Here’s a breakdown of your main options.
Buying the Vehicle
Buying a vehicle outright is by far the simplest option and, if money was no option, the way most businesses would likely prefer to go. This way, you’ll have complete control over the vehicle. This means you don’t have to worry about any restrictive mileage limits or rules against customizing the van to display your company’s logo. However, owning the vehicle brings its share of problems too. At some point, you’ll have to think about selling the vehicle. Depreciation affects each make and model differently, but the general rule of thumb is that you can expect to lose around 40% of the sticker price by the end of the first year, and a further 10% in each of the two following years.
Leasing the Vehicle
When you lease a van instead, however, you’ll no longer have to worry about this since you’ll never actually own it. Typically, leasing contracts work over a 12-60 month period where you pay fixed, monthly rate to use the vehicle. At the end of the contract, you simply return the van to the lender where you then have the option of choosing another vehicle. The obvious advantage of this is that you can keep driving a recent model, which is not only a benefit to your employees but it could also help to boost your company’s image. However, over the full-length of the contract, you most likely end up paying more than you would if you could afford to buy the vehicle outright.
Is There a Middle Ground?
At the point, you may be wondering if there was a middle ground that combined some of the benefits of the two. A personal contract hire from a company like Van4Leasing is the closest approximation of this. Like with a regular leasing contract, you’ll pay in monthly installments. At the end of the contract, though, rather than just returning the vehicle, you can keep it or trade the GMFV against a replacement. Buying the vehicle entails one final balloon payment, set at the start of the agreement, which takes into account the car’s projected retail value of the vehicle.
Each has its pros and cons and none is inherently better than the other. See which options work best for you and your business.