Cheap van finance and advice

Read our finance guide to get the best deals on a new or used van. From cheap lease deals to the best bank loan and hire rates, our tips and advice will help you make the most informed decision when it comes to funding your next vehicle. 

Getting finance for a new or used van can be a complex and often confusing minefield. Should you buy, hire or lease? Take out a bank loan or use your savings?  Where can you find the best hire and PCP deals? 

A new company vehicle can have a positive impact on your business. Waving goodbye to an old and tired workhorse to replace it with something modern, comfortable and smart is good for employees and the image of your company, as well as making it more efficient and cost-effective. 

This van finance guide will outline the different options available and help you make the most informed decision, based on your personal or business circumstances.

Buying a new van: Your financial options

1Bank Loan

The boom in alternative finance methods over recent years may have reduced the popularity of loans, but what has also happened in that same time is the diversification of the banking and financial sector. Today there are hundreds of financial institutions outside of the big banks that offer loans, and this level of competition is good news for the consumer. Add into that the proliferation of price comparison sites and in just a few minutes you can compare a huge variety of loans, making it so much easier to compare and get the best deal. 

Having the money up front also puts you in an advantageous position when it comes to getting the vehicle you want too. The days when having cash in your hand would get you a discount are largely gone; dealerships generate a significant proportion of their revenue from finance and associated products, so there’s no incentive for them to give you a cash discount. What it does give you though is flexibility and the opportunity to make a deal quickly; if you see the right van for you it could take just a few minutes to strike a price and sign on the dotted line instead of applying for finance and waiting for a decision.

One further advantage of taking out a loan for the purpose of purchasing a van is that the finance is not tied to the vehicle in any way. With dealer finance for hire purchase or a contract purchase the vehicle does not belong to you or your business until the payments are complete. This can cause issues if the vehicle is written-off or stolen, or there are problems with your business or even the finance company. If you purchase the van with a bank loan the vehicle becomes your property immediately, and can be sold to raise funds or if not needed at any time.

Important:

  • Separating the finance from the vehicle itself has its disadvantages, chiefly that any bank loan becomes a debt attached to the business, and while the van becomes an asset at the same time its value will likely be less than the remaining balance of the loan during the duration because of depreciation.

  • If the vehicle were to be written-off or stolen any van insurance payout would almost certainly be significantly less than the balance of the loan unless you have GAP insurance.

  • While a bank loan gives you a fixed cost in terms of the repayment, all associated costs of the van must be accommodated separately. Maintenance, repair and consumables must all be paid for in addition to fuel and can vary significantly depending on how the vehicle is used. Failure to maintain the vehicle properly can also affect its retail value as well as increasing the likelihood of breakdowns and time off the road.

  • A bank loan for a higher-priced vehicle may not be available to all businessess. Larger, higher-specification vans can easily exceed £20,000 and if your business is new, small or still recovering from tough financial times a loan of that size may be completely out of the question, or only available at an expensive rate of interest.
2Leasing

The main benefits of leasing a van are that the management of the vehicle can be passed on to the company you are leasing from. Most leasing deals include a maintenance package so this is a cost you can avoid, there is no cost for depreciation as the asset does not belong to you and at the end of the term you can simply return the vehicle.

From a financial perspective, leasing deals usually have a low initial payment which cuts the cost of getting the van working for you, and the monthly payments are also allowable against tax which compares favourably in terms of cost compared to an outright purchase. You also have the benefit of a fixed monthly payment taking care of everything bar fuel, which is helpful from the perspective of budgeting ahead.

Leasing also allows companies that require multiple vans to run a larger fleet based on fix sum, as the initial payment plus monthly are the only ongoing costs.

Important: 

  • One of the key downsides of leasing a van is that you have to abide by the terms and conditions of the agreement or face financial penalties. These terms usually include the vehicle condition including mileage, and normally it has to be returned to its original condition, which may present issues if significant additional interior fittings have been used.

  • Another downside is that you are locked into the agreement for the duration unless you pay an exit fee. If your circumstances change and you no longer need the van or require a different vehicle there will be a cost involved to change the situation.
3Contract Hire

A contract hire agreement is similar in principle to hiring a vehicle from a rental company; you agree a period and hire the vehicle for the duration, except that the term is typically between one and five years rather than days or weeks. As with a conventional hire you do not own the vehicle at any point during the agreement.

Contract hire deals usually require only a small initial outlay, frequently equivalent to a month’s rental. This makes it an attractive option for smaller business or if you are looking to avoid any large financial commitments, compared to a hire purchase that normally demands a big deposit.

A further benefit of the small initial outlay is that you have the potential to hire a larger fleet of vehicles for less money than taking out a hire purchase agreement. For smaller business that do not have as much capital behind them, a contract hire allows efficient and relatively inexpensive expansion to create a fleet of vehicles. The other aspect of this flexibility is that you can decrease the size of your fleet equally easily, making it an attractive option for businesses where workloads fluctuate.

Another big positive of a contract hire vehicle is that maintenance is usually included in the agreement, saving you a significant sum of money as well as time and effort. Other than the cost of fuel, a contract hire allows you to plan for a fixed cost over the duration of the term.

Finally there are specific financial benefits to contract hire compared to other means of purchase or rental. As the vehicle is not owned by you during the period there are no depreciation costs to you, while the monthly payments you make for the contract hire are allowable against tax so there is no additional cost compared to a hire purchase.

Remember:

  • A contract hire comes with a mileage limit for the period of the hire, with a charge of a few pence per mile applied for every mile over the agreed figure, something which could restrict the operation of your business or add a significant cost if you exceed the agree limit.

  • A van obtained through a contract hire must be returned in a reasonable condition taking into account fair wear and tear and the period of the agreement. Any damage over and above this will result in financial penalties. For certain types of business where frequent loading and unloading occurs or certain types of products this may make a contract hire vehicle an unsuitable choice
4PCP

PCP stands for personal contract purchase, which is a means of buying a new vehicle where you pay a deposit, a fixed monthly payment over an agreed term and a final payment at the end of the term which completes the financial agreement and concludes with your ownership of the vehicle. It differs from a traditional hire purchase in that the largest payment - often called the balloon or future guaranteed payment - comes at the end of the term rather than the beginning.

If you need a new van for your business then a PCP can be a relatively inexpensive way of securing what you need. Typically the deposit on a PCP deal is 20 percent or less of the total vehicle value, which is often smaller than a deposit on a typical hire purchase deal.

Another advantage on a PCP deal is that you retain some flexibility when you reach the end of the agreement. In a traditional hire purchase you commit to purchasing the vehicle from the point that you pay the deposit, whereas with a PCP you can walk away at the time when the balloon payment is due, make the final payment and own the vehicle outright or take out a new agreement for a brand-new vehicle and agree a new term.

Remember:

  • Because of the way in which a PCP is structured you have no rights of ownership until the final payment is made, so the vehicle cannot be categorised as an asset during the agreement period.

  • PCPs usually come with a mileage limit; if you choose to hand back the vehicle at the end of the period there will be a penalty to pay for each additional mile, although this does not apply if you choose to make the final balloon payment. By the same token, the vehicle has to be kept in a satisfactory condition if it is to be returned, and anything over and above fair wear and tear may also attract a financial penalty.

  • Until the final payment is made a van obtained via a PCP is effectively under hire, so any modifications that are required for your business must be easily reversible unless you commit to making the final balloon payment or potentially pay an additional fee for rectification work at the end of the term.

Buying vs leasing

Buying

The positive aspects of buying your company van either outright or on finance are largely that the vehicle becomes an asset that you can use as you see fit. It can be modified with any additional equipment that would help your business, any wear and tear or even damage only affects any resale value and mileage also is largely immaterial, all of which may be a significant help.

From a financial perspective buying outright means tax advantages, in that you can offset the capital allowances against tax if it used for business purposes only, and also the vehicle’s running costs.

If you purchase the vehicle using a third-loan you can reclaim interest charges against tax and your own capital allowances even if you are not VAT-registered. Buying outright also means you can budget accurately over any period and your finance costs will not change.

Important:

  • The negative aspects of owning a van outright are that any issues with the vehicle will be the responsibility of the company; any maintenance and repair costs, even if the vehicle comes with a warranty, will ultimately cost the company. The depreciation of the van is also a significant cost; even if the van is hardly used it will still depreciate and this cost will be felt when the vehicle is sold or traded in.

  • Buying outright requires a significant financial commitment, even if it is purchased using finance. A large deposit is frequently required for hire purchase or a large balloon payment for a contract purchase, and if bought with cash reserves or a bank loan it is an asset that continually loses value, and could leave you significantly out of pocket if it is damaged or stolen and you do not have GAP insurance.

Leasing

The main benefits of leasing a van are that the management of the vehicle can be passed on to the company you are leasing from; leasing deals can include a maintenance package so this is a cost you can avoid, there is no cost for depreciation as the asset does not belong to you and at the end of the term you can simply return the vehicle.

From a financial perspective, leasing deals usually have a low initial payment which cuts the cost of getting the van working for you, and the monthly payments are also allowable against tax which compares favourably in terms of cost compared to an outright purchase. You also have the benefit of a fixed monthly payment taking care of everything bar fuel, which is helpful from the perspective of budgeting ahead. Leasing also allows companies that require multiple vans to run a larger fleet based on a fix sum, as the initial payment plus monthly are the only ongoing costs.

Important:

  • One of the key downsides of leasing a van is that you have to abide by the terms and conditions of the agreement or face financial penalties. These terms usually include the vehicle condition including mileage, and normally it has to be returned to its original condition, which may present issues if significant additional interior fittings have been used.

  • Another downside is that you are locked into the agreement for the duration unless you pay an exit fee. If your circumstances change and you no longer need the van or require a different vehicle there will be a cost involved to change the situation.

Can I get a van on finance lease or contract hire?

A contract hire is something of a hybrid between a lease and outright purchase, and has some advantages as a result. Deals can be found with relatively low initial payments compared to hire purchase and moderate monthly fees too. At the end of the term the vehicle can be returned or a new agreement taken out. This gives the advantage of flexibility down the line which is useful if you are unsure on your needs two or three years ahead. The downside is that the same issues over condition and mileage apply as with a conventional lease. You can never take ownership of the van either, which may present a problem to some people. 

A finance lease is similar to a contract hire in that you cannot own the vehicle at the end of the period and has the same advantage in that maintenance is usually taken care of within the package. In addition you can claim 50 per cent of the VAT payments as the vehicle is regarded as a debt, unlike a contract hire agreement. A finance lease is only available to VAT-registered companies however, so will not suit some smaller business or sole traders. It is also important to note that as this is a financial agreement it is subject to changes in interest rates, so your monthly payment is not fixed.

VAT (value-added tax)

If you’re buying a new van or pick-up for your businesses then it’s important to understand how VAT rules work, because it could potentially save you (or set you back) thousands on the list price and monthly payments of your new vehicle.  

Many van deals and offers are advertised excluding VAT, which means you may end up paying more than the headline figures suggest.  Registered businesses can reclaim the VAT paid on vans and pick-ups, but how much you claim will depend on the usage of the vehicle. For example, a van that is used for a business 50 per cent of the time can only have 50 per cent of the VAT reclaimed. You can also claim the VAT on leased commercial vehicles, subject to the same conditions. 

Examples of high street lenders' business loan rates

  Amount that can be loaned Highest representative APR Lowest representative APR Other information

Barclays Business Loans

Barclays 

£1000-£25,000 14.9% 8.9%

Option to have a 6-month repayment holiday at the beginning of your loan

HSBC Small Business Loans

Hsbc -logo

£1000-£25,000 15.0% 5.9%

No charges for additional repayments to your loan, and an option to defer your first repayment for three months

Nationwide Start Up Loans

Logo 2xtrans (1)

£500-£25,000 6.0% 6.0% No set up fee and interest rate fixed at 6% per annum for businesses that have been trading less than two years

Natwest Business Loans

New Logo Rebrand

£50-£25,000 12.4% 8.9% No arrangement fee and fixed rate of interest for duration of the loan

Royal Bank of Scotland Business Loans

Download

£1000-£25,000 12.4% 8.9% Fixed rate of interest and no charges for early repayment of loan

Santander Business Loans

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£2000-£25,000 8.9% 8.9% 8.9% is only available to Santander Business Current Account holders

*Updated February 2019, headline figures taken from lenders' websites. Terms and conditions apply.

Vans and pick-ups for under £200 a month

Volkswagen Caddy 1.2 TSI 84PS Startline

Volkswagen offers contract hire deals or finance lease deals on the Caddy for business customers, but this 48 month £199 contract hire offer for the petrol Caddy van caught our attention. When leased through Volkswagen Commercial Vehicle Finance, you get a £1000 deposit contribution, so there is nothing to pay in advance. 

What you pay:

OTR price (excluding VAT): £15,270

Finance method: Contract hire

Volkswagen deposit contribution: £1000

Advance payment: £0

Monthly payment £199

Length of agreement: 48 months

Annual mileage 10,000

Click here to read the full review of the Volkswagen Caddy

Mitsubishi L200 Series 5 2.4 DI-D Titan double cab

The Mitsubishi L200 is a firm favourite with builders, thanks to its one-tonne payload, big towing capacity and sophisticated four-wheel drive system. There are some tempting deals on contract hire too, with the Titan model available from £199 against an 8000 mile annual limit. 

What you pay:

OTR price (excluding VAT): £23,980

Finance method: Contract hire

Advance payment: £2388

Monthly payment: £199

Length of agreement: 35 months

Annual mileage: 8000

Click here to read the full review of the Mitsubishi L200

Vauxhall Combo Edition 1.6 Turbo D L1H1 

The all-new Vauxhall Combo is a brilliant van, with its one-tonne payload complimented by a refined drive and low running costs. Vauxhall is offering zero per cent APR on six-year (72 months) hire purchase finance, which means you can drive the International Van of the Year from £168 a month when you pay a deposit of £5565.

What you pay: 

OTR price (excluding VAT) £16,355

Finance method: Hire purchase

Advance payment £5565 months

Monthly payment: £168

Length of agreement: 72 months

Click here to read the full review of the Vauxhall Combo

Click here to see the full list

Five Things To Check Before You sign

How much will you pay?

It’s easy to focus on the monthly payments, but how much will you actually pay in total? Sit down and examine all of the costs (including any arrangement fees) to see exactly how much the van will cost. If you are taking out a bank loan, ask about the interest rates. Is it fixed for the life of the contact or could it increase without warning? 

Does the contract have a mileage limit?

Never agree to a vehicle financial agreement without check the mileage limitations first. Some of the cheapest deals, with the most tempting monthly fees, will have the lowest annual mileage limits. Does it match your business needs? What are the excess mileage penalties?

Always check the small print; excess mileage charges can easily result in higher costs than will be more than the monthly repayments of a financial deal with a much higher mileage limit.

Examine the service agreement

There is a difference between a service and full maintenance agreement; the former only covers for the intermittent service as and when required and may not cover for other wear and tear, such as replacement brake discs or tyres.

The full terms, conditions and potential penalties must be provided

A dishonest salesperson might gloss over many of the important small print items that could leave you out of pocket. For example, what happens if your circumstances change and you need to leave the leasing agreement early? Always demand full documentation so you can prepare for every eventuality. 

Request a full clarification of ‘fair wear and tear’

Leasing contracts will have a ‘fair wear and tear’ policy, which will outline what financial penalties that will be enforced against what is considered to be unreasonable damage to the vehicle. Ask to see these terms and conditions. Some finance provers will accept scuffed paintwork in the van’s load area and paint scratches. Others might demand £500 to rectify them. It’s always wise to see the full wear and tear terms before signing on the dotted line. 

What to do if something goes wrong

1Mis-sold van finance?

The basis for mis-selling of a financial product is broadly the same regardless of the product itself, whether it is a van loan, a bank loan, contract purchase or PCP; the crux of potential mis-selling is whether or not you were sold a product that was not suitable for you and your circumstances, the risks were not explained to you or you were given the wrong advice. Remember that the issue must be with the financial product and not the vehicle.

Important: 

  • Depending on the nature of the product you may have a 30-day cooling off period - check all your paperwork carefully to see if this is the case - and make contact with the finance provider as soon as possible. If you have purchased finance through a dealership it is highly likely the finance itself will have been provided by a third party, and it is this company you will need to contact if you wish to cancel.
  • If you are outside of the 30-day period and you believe you have been mis-sold a financial product, you must make a complaint to the provider as soon as possible. Go through all of your paperwork carefully and any communication you have with the provider, particularly if anything relates to provided information you feel was misleading. If relevant conversations were conducted over the phone, try and note down dates, times and ideally names of who you spoke to as recorded conversations could be recovered.

  • Gather your information together and write to the dealer principle if your complaint is with a dealership or to the complaints department if it is a financial institution; the latter has to provide you with a copy of their complaints procedure if you request it. State your case clearly, concisely and calmly - accusatory or emotional statements are more likely to get a defensive response - and send your complaint by recorded post as a signature proves it was received and a response is required by law.
  • If you are unsatisfied with the response you can approach the Citizen’s Advice Bureau and they may be able to look at your case and advise on the next steps to take. Alternatively you can escalate the complaint by taking your case to the Financial Ombudsman, a body set up by the government with the power to investigate a whole range of financial products.

2I can’t afford the payments anymore, what should I do?

You may have been happy with your van and the financial arrangement you took it out, but it may be that you are now having problems keeping up with the payments. This could happen for any number of reasons, such as a hold-up in cash flow, a loss of clients or just a quiet period for your business, but regardless of the reason it is important to take action to avoid negative consequences.

If you know you cannot afford an upcoming payment then contact your finance provider as soon as possible. If you explain your circumstances and can say when you will be able to make the payment it should avoid any missed payment letters being automatically generated and may also mean you can avoid late payment fees being added on top.

Important:

  • Whatever the circumstances, contacting the company that provided the finance and keeping them informed is essential. If you fail to do so, it is only a matter of time before the vehicle is repossessed - this will hurt your company’s credit rating and leave you without a van.

Bank loans

If you took out a bank loan to buy the vehicle then the solution is relatively simple, as you can sell the van and use the money to clear some or all of the remaining loan; get a settlement figure from the finance company to know exactly how much is required to pay off the loan in one go.

Hire purchase and PCP

If you have a hire purchase or PCP agreement on your van it is a little more complicated. If you have paid 50 percent or more of the total amount owed when you first bought the vehicle (this total will be in your documentation) then you have the right to return the vehicle under voluntary termination. You can do this and owe nothing more and without damaging your credit rating, although this option may make it more difficult to obtain finance in the future. The vehicle must be in good condition for you to take advantage of this option.

If voluntary termination is not an option you should contact the company and explain that you are experiencing financial difficulties. Depending on your circumstances and how they may change in the future they may be able to help with a payment plan or even rearrange your finance with a new agreement over a longer term to reduce the monthly payment. Another alternative is to take out a loan to settle the agreement so you will own the vehicle outright; this may give you the breathing space so that you can keep your vehicle.

3How do I reject a faulty van or pick-up?

Your rights are against the dealer and the finance company jointly if you bought it on finance - not against the van manufacturer.

The Consumer Rights Act 2015 theoretically gives you the statutory right to reject a new or used van within the first 30 days of purchase if any fault is found. Most of the Consumer Rights Act 2015 applies to business-to-business sales, but you do not get an automatic right to a refund.

The best piece of advice we can offer is to try to settle the matter without getting legal. Once a dealer knows you know your legal rights he’s more likely to settle, as long as you are being reasonable. If the van is on finance you can take the matter up with the finance company.

Write to both the dealer principal and to the finance company and send your letter by Post Office Special Delivery so you get receipts for them and your letters become 'matters of record' which can't be denied.

Remember, taking the dealer to court should be you last resort. If both the dealer and finance company refuse to accept your rejection of the van, you can't continue to use it while taking court action against them - that means your vehicle could be sitting on your driveway for weeks and you’ll need to source a replacement until the matter is resolved.

4Still got a problem? Ask Honest John Vans for help
Ask HJ

Can I get out of a leasing contract early?

I am currently in a three-year personal van leasing and my circumstances have changed so I need to get out of this. I am 18 months into it - is it possible to get out?
This will very much be at the discretion of the leasing company and the terms and conditions for early termination should be set out in the documentation you received when you took out the fixed-term agreement. In my experience, almost all firms demand some form of fee or penalty payment to end a van lease early - this can be as much as 50 per cent of the outstanding balance. First things first, contact the leasing firm and ask about any potential fees associated with a query about early termination – it isn’t unknown for a leasing company to demand money to simply look into this for you. Explain your situation and be honest about the reasons you want to end the lease early. They might take your situation into consideration and allow you to leave the contract for a nominal fee. Alternatively, they might offer to extend the lease and lower the monthly payments to allow you to keep the van and reduce your monthly outgoings. Or they may allow you to swap to a different van, to match your change in circumstances. Sadly, they will not allow you to walk away without paying some form of penalty.
Answered by Dan Powell
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I plan to do 30,000 + miles per year - should I buy or lease a van?

I need a van that looks professional, smart and modern. Love the Volkswagen range but budget may not stretch to a new model. It needs to be converted for fish sales, which will cost about £6000. The Renault Trafic is an option and Ford look the part. What would you recommend? Will be doing 30,000 + miles per year. I'm not looking at secondhand. Resale value will be minimal. Should I lease or buy on HP?
If you're doing high mileage then I'd recommending buying outright, as most lease deals will have strict mileage limits that might not suit your working life. Personally, I'd search for a pre-reg van as these can offer big savings that could cover the £6000 you'll spend on the conversion. Pre-reg vans are effectively surplus stock, sold cheaply as “ex demo” or “delivery mileage” vehicles with savings of up to 30 per cent. The Ford Transit Custom is one of the best medium size vans on the market: https://vans.honestjohn.co.uk/van-reviews/ford/transit-custom-2013/ But I'd also consider the excellent Toyota Proace as this is backed by a five-year 100,000 mile warranty: https://vans.honestjohn.co.uk/van-reviews/toyota/proace-2016/
Answered by Dan Powell
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