If you are a business owner that needs a van to help operate effectively such as if you are a plumber, painter and decorator or electrician, one of the decisions you will need to make is how do you fund the purchase of such a vehicle. For instance, are you able to purchase the van with cash or do you need to arrange some form of finance to buy it or do you take out a contract hire agreement meaning that you will never actually end up owning the commercial vehicle?

There are no doubt positive and negative factors about all the above options so let’s discuss these in a little more detail.

If you were to pay cash for your new van it would mean that you would not have to set funds aside each month to meet any finance repayments meaning that, should your business go through a difficult trading period, you would not have to worry where the monies are going to come from to meet the repayments. Therefore, you would not be in danger of the lender taking possession of the van.

However, could you have used the monies that you have spent on buying the van outright to help improve your business perhaps by additional marketing or taking on an employee enabling you to take on extra work thus increasing the profit of your business and your individual income?

You could arrange a bank loan to buy a new van perhaps putting down say a 25% deposit towards the purchase price with these monies either coming from your own resources or by putting your existing used van in part-exchange. You may be able to offset the interest that you pay on the loan against tax.

If either of the above two options is chosen you will be responsible for all the running costs of the van.

You may be able to lease a new van or obtain one on contract hire but you will never end up owning the vehicle outright. Minimal capital outlay is often involved. You will not normally be responsible for the running costs of the van other than putting fuel in the vehicle. However, you will be limited as to the number of miles you can travel in the van each year.

Before deciding what the most suitable option is for you, you might like to obtain some professional advice.