Van Contract Hire

What is Van Contract Hire?

Van Contract Hire (or Business Contract Hire) is where you pay a monthly fee and have a fixed mileage limit. Similar to vehicle rental, Contract Hire requires that you pay for the use of the vehicle and simply hand it back to the finance company when you’re finished. The difference is that with contract hire, you do not have the requirements of a balloon payment or selling the vehicle, and you will be subject to damage costs and excess mileage charges. You will pay fixed monthly payments for an agreed period – at the end of the contract, you will then either return the vehicle or ask for an extension.

How Does The Payment Work?

The initial rental or deposit is the equivalent of 1 – 12 months’ rental costs in advance, plus the VAT on this figure. Van contract hire is also known as an operating lease but this term is rarely used. You can have the added option of a maintenance package which will give you a fixed cost for all your servicing, maintenance and tyre needs. You don’t have to worry about selling the vehicle at the end of the contract, or any depreciation.

What Are The Things I Should Know?

There are some important things you must take into consideration before taking out a van contract hire agreement.

1. The contract is mileage sensitive – Meaning that if you exceed the mileage limit given, you could be subject to extra fees at the end of your contract.
2. The vehicle is subjected to an inspection – Where any reconditioning costs are charged to the customer. This is ideal for VAT-registered larger fleet operators.
3. Rentals are 100% allowable against taxable profits with no private use – You have total budgetary control – fixed costs, as long as you stay within the mileage. At the end of the contract, simply hand the vehicle back.
4. You do not have ownership of the van – During and after your lease period, the vehicle is under full ownership of the finance provider. While you will have full use of the van under your contract, the vehicle will need to be respected as a rental. Any customisations will need to be pre-approved by the finance provider.

While van contract hire brings both its pros and cons, it ultimately boils down to your needs and priorities in knowing whether this is the right leasing option for you. At Crusader Vans, we’re dedicated to helping you find the most ideal leasing type for your business needs, so to keep your options open, here are some of our other van finance options available…

Our Other Finance Options

While van contract hire may be an appealing option, we also have a number of other van finance options to benefit your business.

Van Hire Purchase (HP)

This is a flexible finance option that gives you the benefit of taking ownership of a brand new van without paying the entire vehicle value upfront. This is particularly suitable for companies or individuals who are looking to have full ownership of their van at the end of their hire period. Here are some of the most notable upsides to van hire purchase:

Vehicle Ownership

The most obvious positive to van hire purchase is the benefit of owning the vehicle once the Option To Purchase fee is paid. This provides business owners an added sense of security while also making a worthwhile investment.

No Mileage Restrictions

Unlike van leasing options, you aren’t restricted to a set mileage, which is particularly helpful to businesses who spend an excessive amount of time on the road.

Simple Finance Method

Van Hire Purchase is a straight-forward method of financing your van. Once the initial deposit has been made, the remaining costs are then paid on a monthly basis until the full value of the van has been paid – then it’s yours!

Capital Allowances Available

As your vehicle is considered a business asset, you can claim capital allowances on your van, making it highly convenient for tax purposes and maintaining your balance sheet.

Low Interest Rates

Van Hire Purchases often come with low fixed interest rates, meaning you’re protected from inflation, and will save costs in the long-term.

Flexibility

When you take out a Van Hire Purchase, you have the freedom to decide how much to place down for your initial deposit. It’s important to note, the more you invest initially, the lower the monthly instalments costs afterwards.
Van Hire Purchase offers business owners the benefit of owning a vehicle while paying for it via manageable monthly costs. This makes it an attractive option for those looking to invest for the long-term.

Learn more on Van Hire Purchase here. 

Van Finance Lease

This is another attractive leasing deal for those who want to take control of a new van without committing to ownership at the end of their contract. This is paid for with fixed monthly rentals until the end of your lease. Here are some of the benefits that come with this option:

End-Of-Lease Options

At the end of your lease contract, you have multiple options at your disposal. These are to either sell the vehicle, apply for a secondary lease term or to return the van. As part of your lease agreement, you aren’t allowed to keep the van at the end of your contract.

No Fixed Annual Mileage

With no mileage restrictions, you have the freedom to use your van as much as you choose during your lease period.

Fixed Term Agreements

Once an estimated residual value is agreed with your lessor, you’ll then enter a long term rental agreement (usually covering anywhere between 2-5 years), and pay fixed monthly rental costs before a balloon payment at the end of your contract.

Breakdown Cover and Road Tax Included

Similar to Contact Hire, our Finance Leasing agreement covers both your breakdown cover and road tax, ensuring that your business remains protected and compliant during your contract duration.

Flexible Low Deposit

An initial deposit payment can be anywhere between 1-12 months’ rental costs, plus VAT. A Van Finance Lease allows the flexibility to make an initial payment that works in your best interests.

No Residual Value Risk

With Van Finance Lease, you get the benefit of using a new van without being responsible for its residual value at the end of your contract. This allows you to enjoy lower monthly rental costs in comparison to some other finance methods.

For non-VAT registered businesses who want the freedom of flexibility and a low initial deposit, Van Finance Leasing could be just the solution you need to finance a brand new van at affordable monthly costs.

Learn more on Van Finance Lease here.

Van Lease Purchase

This is another option for those looking to have full ownership of their vehicle at the end of their lease contract. You’ll be required to place down an initial deposit (this is usually the full VAT cost), followed by fixed monthly payments, with the option of making a balloon payment at the end of your contract.

Vehicle Ownership Upon Completion of Contract

Once all payments have been completed, you’ll have ownership of your vehicle. This makes lease purchasing a great way of owning a car without the large upfront costs.

Capital Allowances Available

As your van will be considered a business asset, capital allowances can be claimed on your vehicle, making it great for tax relief and balancing the books.

VAT Reclaimable in 1st Quarter (if VAT-registered)

This allows VAT-registered businesses to reclaim a significant portion of their VAT paid upfront on the purchase price of the van. This allows for greater flexibility in payments and to effectively lower your initial investment.

Lower Payments

Alongside your initial deposit, the balloon payment option at the end of your lease allows for lower monthly rental payments in between.

For those looking to take ownership of a van in the long-term, Van Lease Purchase can be an attractive option with its simplicity of finance and its tax and VAT benefits.

Learn more on Van Lease Purchase here.