When it comes to van finance, as with all fiscal decisions, it is better to have as much information as possible at your fingertips. Finance can be a confusing minefield at times for the uninitiated so our team has put together a clear and concise guide to van finance deals. It covers all the basics you should understand and the top questions to ask your van financing provider before signing the contract.
It always pays to check you have the right understanding of the details:
- Will there be the option to purchase the vehicle at the end of the contract?
As we will see when analysing the details below, this is a significant difference and one that it is essential to think through carefully. Vans, in particular, are prone to extremely high mileage and are not always treated as carefully as we might like. While they are designed for that exact purpose, the value is likely to be drastically reduced in a vehicle that may have covered many hundreds of thousands of miles, be covered in dents and scrapes, and now belongs to you.
- Will the monthly payments be fixed?
Variable payments are likely to be dependent on interest rates and the vehicle could end up costing a lot more than anticipated if those rise. If in doubt, you at least know exactly where you stand and what is required with a fixed payment.
- What amount of deposit will I be expected to find?
Conditions vary and it may be that those with better credit ratings can find themselves needing either a very small deposit or none at all. It should be noted, however, that any cash deposit paid is likely to positively impact the terms of the contract and the amount of the monthly repayments. It is always worth considering paying the largest deposit you can afford and being in a better position to secure a good deal.
- Will I be charged for excess mileage or any damage incurred?
This is particularly pertinent with van financing, as we already noted that the potential for excessive mileage and minor damage is significant.
- Is road tax included?
- Are there any other perks on offer like breakdown cover?
These are two benefits that might be included in the contract, but there may be others, depending on the option chosen. You should make sure they are definitely included if they are part of your budgetary considerations and overall assessment of the deal.
- Is there anything hidden in the small print I should be made aware of?
Read the small print carefully!
Let’s look at the various options available when it comes to securing van finance:
- End-of-lease flexibility, with options to trade in or own outright
- Fixed monthly cost
- VAT cost is spread evenly across the full length of the lease
- If registered, that VAT can be claimed back
- Contract length of 2-5 years
- No charges for excess mileage or any damage incurred
Personal contract hire (PCH)
Also referred to as ‘leasing’, personal contract hire financing operates in almost the same way as a finance lease. The only differences are:
- Less flexibility on completion of the contract, and no option to own outright
- Charges for excess mileage and damage incurred
You rent a vehicle for the agreed period and give it back to the dealer at the end of said period. There is no attached option to keep the vehicle. This requires a cash deposit and monthly payments thereafter, determined by the time period involved and the expected mileage the vehicle will travel annually.
When most people reach the end of a particular personal contract agreement, they simply roll it over and start a fresh one. This means they can periodically drive away with a brand-new vehicle. Some other perks of PCH contracts include:
- Breakdown cover
- Waived road tax
- Full warranty coverage
This is an extremely popular way to handle van and other vehicle finance in the UK.
Hire purchase is a totally different proposition because, at the end of the contract, you are now the outright owner of the vehicle and have nothing left to pay.
Depending on your circumstances, deposits aren’t always necessary but help to lower the interest rate and reduce monthly repayments. Some key points about hire purchase agreements:
- Guaranteed vehicle ownership when the contract comes to an end
- Fixed monthly cost
- VAT must be paid in full at the commencement of the contract
- RFL (road tax) is included for the first contracted year
- Contract length typically 3-5 years
- No charges for excess mileage or damage incurred
Some other options are available and we can discuss those with you when you get in touch, but for now, we will just list them with a brief synopsis
- Conditional sale
Conditional sale loans share similarities with hire purchases. In both cases, you will find yourself the owner of the vehicle when the contract expires. The monthly payments will almost certainly be higher but there will be no unpleasant extra fees at the end
- Personal contract purchase (PCP)
Similar to both hire purchase and leasing as there is an option on the table to pay a final amount as a lump sum at the end of the contract. This entitles you to retain the vehicle if you wish or swap it out for a new one.
- Personal loan
You borrow the entire sum for the vehicle upfront and pay it back with interest like any loan. The better your credit is, the less aggressive your rates may be. You are free to do as you wish with the car, including selling it if you wish.
- Guarantor Loan
Exactly the same, except someone else’s credit rating and collateral guarantee the loan. If you default, they have to pay.
If you’ve been thinking about looking into used van finance deals in the UK then we hope you found this guide to van finance deals informative and useful. There is no substitute for speaking directly to an expert with all the knowledge and expertise you need to make an informed, sensible decision that works best for you. When you’re ready to do so, please do not hesitate to contact the professional team at Used Van Finance Deals and we can discuss your exact requirements and options.