Hire purchase
A guide to hire purchase
There are many ways to finance a new van. One of them is with a Hire Purchase agreement. So what is Hire Purchase? It’s the traditional way of funding a new van, and also the most straight-forward – especially if you want to own your van at the end of the finance agreement.
How van Contract Hire works
By choosing a van Hire Purchase agreement, you will eventually own the van that you’ve acquired. This means you are free to do whatever you want with the van when your agreement is over, so there are no mileage or damage restrictions to worry about. This is particularly attractive for those who cover a lot of miles or operators with vans that get ‘knocked about’, like builders, for example. This is different to a van lease where you wouldn’t own the van at the end of the agreement.
How van Hire Purchase works
A typical van Hire Purchase agreement runs for a fixed period between two and five years. You pay a deposit or initial payment, usually equal to the VAT cost on the van. By doing this your monthly repayments are not subject to VAT. The remaining balance is then paid monthly over the duration of your agreement. When this is complete, the van is yours! If you’d prefer, you can pay a higher deposit to reduce your monthly repayments.
Benefits of van Hire Purchase
There are some great benefits to opting for a new van on a Hire Purchase deal. If you’re VAT registered, then the VAT can be offset against your VAT bill. If you’re not VAT registered then you can pay a lower deposit. When you buy a new van on a Hire Purchase agreement, the van appears as an asset on your balance sheet. This means that the cost of the van can be written-down using the standard writing-down allowances – unless using the Annual Investment Allowance (AIA).
Furthermore, the interest you pay on your finance agreement is reclaimable against your tax bill. You can also offset the capital allowances against tax if the van is only used for business purposes, as can the van’s running costs. You also get a full manufacturer’s warranty with a new van, giving you peace of mind in regards to any potential problems.
The downsides? Depreciation is the biggest drawback, although as mentioned it can be written-down against taxable profits. Motor vehicles rarely – if ever – appreciate, so it’s worth remembering that a van with a higher mileage will be worth less when you try to sell it. When you own your van, you are responsible for its maintenance. This covers everything from maintenance, repairs, insurance (although we can help you get a good deal – here) and road tax. Don’t forget, when you buy a new van from Vansdirect, the first year’s road tax is included, as is roadside assistance!
All vans sold from Vansdirect on a van Hire Purchase agreement come with a full manufacturer’s warranty, free delivery and the first year’s road fund licence and roadside assistance.
Eligibility criteria
If you’re thinking about a new van on a Hire Purchase agreement – or any form of van finance – be aware that van finance companies will look for a number of different criteria. You’ll need to be able to show evidence of the following: address history (3 years), UK residency, full UK driving licence and one successfully completed credit item in the last 3 years. When applying for finance on a new van, the van finance company will run a full credit check.
Van finance
Looking for van finance? We also offer van leasing and van contract hire! Simply fill in a contact form or call us on 0800 169 69 95 for a friendly chat regarding all of your new van needs!