Yes, you can finance a van through your business.
Businesses of all sizes are attracted to the benefits of financing their vans, to easing the burden on cash flow, possible business tax relief, and the ability to upgrade to more advanced vehicles regularly.
Commercial vans are a staple for businesses across the UK, used for any function from a sole-trader carpenter to a liveried delivery van for the UK’s largest firms.
There are a number of different options available for financing a van through your business:
Hire Purchase (HP)
Your business pays a deposit and then repays the remaining balance of the loan with interest in monthly repayments. HP helps to spread the cost of your business acquiring a new van. With Hire Purchase, you never have to worry about rising interest rates or mileage charges – HP payments remain fixed for the term of the loan. When the last repayment is made, you then own the van.
Hire Purchase with balloon payment
This helps keeps your monthly repayments as low as possible. Similar to standard Hire Purchase, the payments remain fixed for the term of the loan, and you own the van outright at the end of the agreement when you pay the balloon payment.
Finance Lease
Benefit from low monthly payments and contract flexibility. Lease used or new vehicles and reclaim up to 100% of the VAT charged on your monthly payments (if applicable). You are responsible for the van’s maintenance and insurance costs. You can choose to buy the van(s) at the end of the contract or rent the van(s) on a long-term hire and hand them back at the end of the agreement.
Sale and Leaseback
Sale and leaseback is similar to an equity release. Recoup the cash value of the van(s) by selling your van(s) to a lender, then rent them back from the lender for business use. By using sale and leaseback to finance a van, your business will benefit from the following:
- Improve your balance sheet
- Free up cash flow for other investment
- Limits any asset depreciation costs for your business
Why choose to finance your van?
- Spreads the cost: Using finance to acquire a van means you spread the cost of the van over manageable monthly repayments, freeing up cash flow to deploy into other areas of your business.
- Tax relief: You may qualify for tax relief on your commercial van, take a look at our guide on the tax implications of financing a van for your business to learn more.
- Regular upgrades: Financing a van (or fleet) via a finance lease for your business allows you to upgrade your van more regularly, ensuring your business operates at full efficiency and capacity.
Can a sole trader finance a van?
Yes. The process of applying for van finance as a sole trader is similar to how you’d apply for a personal credit card. Lenders will consider factors including your personal credit history, copy of your latest tax return, proof of earnings (SA302), proof of income, and employment history evidence.
Van costs can also be 100% tax deductible for sole traders; and if you are VAT registered – you can reclaim up to 100% of the VAT element of your van finance.
Can you buy a used van on finance?
Yes, used vans are financeable. Your eligibility for being approved for used van finance will depend on various factors which are explained in detail in our used van finance guide.
Frequently Asked Questions
Is a van 100% tax deductible?
Yes, a significant advantage to buying or leasing a business van is that 100% of the van’s cost can be claimed as capital allowance, depending on which type of finance you have. If you lease your commercial van, you can qualify to claim back 100% of the VAT you pay on the finance, for example.
Can I finance a van with bad credit?
Yes, however lenders may be more stringent with their terms. You may be asked to pay a higher interest rate or a larger deposit if your credit history is less than favourable. If you’ve been turned down elsewhere in the past, this doesn’t disqualify you from finding the right finance company who can arrange finance to suit your business’ requirements.
Is it better to lease or finance a van for my business?
The choice between the two depends on your business’ financial position and your long-term intentions for the van – and your business too. If you wish to own the van at the end of the agreement, then a finance loan may be the best route to take. If you do not wish to ever own the van, leasing may be the better option.
What are the interest rates when financing a van for my business?
We cannot say with full confidence what interest rate would be applied to your finance, as every commercial finance application is different. The rate you are provided by the lender will be decided by a number of factors; including your credit history, your business’ financial position and your current assets.
Conclusion
Financing a van through your business is a sensible way to manage cash flow when acquiring a new commercial van. Additionally, finance allows you to more regularly upgrade your van, giving your business access to the most advanced technology to improve operational efficiency. The possible tax relief benefits are also noteworthy and help to justify regularly acquiring new vans for your business on finance. To speak with a broker who understands asset finance, get in touch with Mill Wood.
