The modern van is a high specification vehicle employing many of the latest advances in automotive design, technology and construction. This level of engineering, however, is not inexpensive and purchasing a new van – or fleet – inevitably results in a serious outlay of capital. But this need not be the case as there are a number of ways of spreading the cost over a period of time, allowing electricians to acquire the new van or vans they need without overstretching their finances.

The subject of finance can be bewildering. So let me explain what is available in terms of finance to van buyers, and how these products can be adapted to meet individual circumstances.

Whether your business requires a compact van, a medium size or large panel van, before deciding on the finance you want, a number of important factors should be considered. For example, how long do you expect to run the van? Can you estimate the annual mileage? Do you eventually want to own the van?

The answers to these questions will help you to decide which is the best finance product for you.

Hire Purchase
Hire purchase (HP) is the traditional form of finance agreement employed to offset a large capital outlay and it still remains popular.

With other forms of credit, such as a loan or credit card purchase, the goods you buy belong to you as soon as the transaction is completed. Under a HP agreement you pay an initial deposit followed by monthly instalments over an agreed period. Each installment is made up of a portion of the money borrowed plus interest, but you don't legally own the goods until the option to purchase fee is paid with the final payment.

Nevertheless, hire purchase still offers several attractive benefits. The initial deposit can be relatively low; the interest rate is fixed for the duration of the agreement; monthly repayments are fixed in line with the contractor’s budget; and hire purchase is generally available for both new and used vans.

Although hire purchase remains a popular form of finance, other products – based on fixed-cost payments over an agreed period – are now available that offer much greater flexibility.

Contract Hire
Today many businesses are opting to hire as this eliminates the concern over vehicle depreciation and resale. Contract Hire allows businesses to operate the van/s for a monthly rental over one, two, three or four years and at the end of the contract, simply hand the van/s back to the van centre.

Lease Purchase
Lease purchase is an extremely cost effective way of eventually owning a new van. The lease period can range from one to four years, during which time you make monthly payments but defer payment of a percentage of the vehicle’s cost until the end of the agreement. The monthly payments and payment period are agreed to suit budget and cash flow. Furthermore, the interest paid is allowable against income tax.



Finance Lease
A finance lease agreement sees the finance company retain ownership allowing it to recover the VAT on the cost of the van/s and then pass the savings back to customers through reduced monthly payments.

After the duration of the lease period is decided – normally two, three or four years – the customer makes an initial advance payment before selecting one of two options:
• Spread the cost equally over the full term
• Pay a higher final rental to reduce the monthly rental still further

At the end of the agreement the customer can sell the van on the finance company’s behalf. The proceeds of the sale will be refunded to the customer when all the terms and conditions of the lease agreement have been met.

Additionally, with Finance Lease and Contract Hire agreements you may be able to recover up to 100 per cent of the VAT payable on the monthly rentals, but only if your business is VAT registered and your van is used exclusively for company purposes*.

Contract Hire, Lease Purchase and Finance Lease agreements offer electricians flexible and affordable finance solutions designed specifically for their needs.

Furthermore, if your business would benefit from a new van, the bank does not necessarily have to be your first port of call. Major light commercial vehicle manufacturers now offer a broad range of competitive and flexible finance products that can be tailored to suit individual needs.

* Taxation and accounting practices are subject to change and current business allowances can be changed at any time. It is recommended you seek independent tax advice prior to entering into any finance or hire agreement.