December 05, 2016

Hire Purchase – Vanman’s guide


There are no shortage of options when looking at financing your new van, Hire purchase tends to be the most straight forward option and is the only option available where you own the van at the end of the agreement. So what is Hire purchase? And is it the best way for you to finance your new van?

Hire purchase – How does it work?

Hire purchase agreements run between 24 and 60 months and allow you to own your van at the end of the agreement, giving you the free reign to do whatever you choose with the van at the end of the agreement, its yours after all! This option can be very popular for trades that cover a significant amount of miles and those that are likely to endure a significant amount of wear and tear. You pay an initial deposit, usually equal to the full VAT of the van (your monthly payments do not then occur VAT costs), you then pay monthly payments until the end of your agreement, at which point the van is yours. You can choose to pay a higher deposit if you wish to reduce the monthly payments.

Hire purchase benefits

There are a number of benefits of choosing hire purchase for your new van. Firstly, VAT can be offset against your VAT bill if you are VAT registered, if you aren’t you are able to purchase using a lower initial deposit. Using hire purchase for your new van also means that the van is present on your balance sheet, the result of this is that the cost can be accounted for using standard writing-down allowances, unless using Annual Investment Allowance (AIA).

We’ve already covered the fact that you own the van at the end of the agreement, giving you a tangible asset at the end of the term, the interest you pay on your hire purchase agreement can also be reclaimed against your tax, furthermore you can offset the capital allowances against tax if you only use the van for business purposes, this also applies for the van’s running costs.

Benefits do not end there, all hire purchase deals from Vanman come with a full manufacturer’s warranty and first year’s road fund licence and roadside assistance! You won’t be hit with a substantial delivery charge either, all Vanman deals come with free UK wide delivery!

Hire purchase drawbacks

The biggest drawback is depreciation and despite this, it can be written-down against taxable profits. The other potential drawback is that when you own the van, you are solely responsible for its maintenance, this includes: repairs, insurance and road tax, however as mentioned previously, when you purchase from Vanman you get the first year’s tax and roadside assistance free of charge.

 

Are you eligible?

If you’re looking for a new van hire purchase agreement from Vanman, finance companies will examine whether you meet certain criteria. You’ll be required to show evidence of factors including: 3 years address history, UK residency, full UK driving license and one item successfully completed on credit in the previous three years. When applying for a new van on finance from Vanman, the finance company will conduct a full credit check.