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The Difference Between Van Leasing and Hire Purchase Vans

February 17th, 2021

If you’re thinking about investing in a new van, and haven’t leased a vehicle before, it’s important to understand the difference between the types of finance agreement.

Many businesses have seen the advantages of van leasing rather than buying, allowing them to spread the cost over an agreed term rather than forking out a chunk of capital upfront.

Van leasing can seem complicated, especially if you’re unfamiliar with the terminology. That’s why we’ve put together this handy guide, making sure you’re well informed and ready to look into the best leasing deals for you.

Types of Van Leasing Agreements

The three main options offered by a van leasing company are Contract Hire, Finance Lease, and Hire Purchase. While all three require monthly payments across an agreed term, there are some major differences to be aware of so that you can ensure you choose the right option for you and your business.

  • Contract Hire: A long term rental of 2-5 years. You are able to spread the VAT cost over the term, and options for low upfront payments are available. The vehicle in handed back at the end of the term, subject to excess mileage and damage charges.
  • Finance Lease: This option (like Contract Hire) offers the possibility of low upfront payments, and VAT can be spread over the 2-5 years of the term. However, with Finance Lease you have different options at the end. You can: buy the vehicle, sell to a 3rd party, trade back, or re-finance. There are also no excess mileage or damage charges.
  • Hire Purchase: With this option VAT is paid in full upfront rather than spread over a 2-5 year term. There is no final rental payment, and no mileage charges. You retain full ownership at the end of the term.

Looking at things simply, Hire Purchase is renting to buy, Contract Hire is renting to hand back, and Finance Lease bridges the two – with flexible options at the end.

Pros and Cons of Van Leasing and Hire Purchase Vans

There are benefits to each financing option; when looking at long-term van lease it’s important to find out which one works for you and your business.

This table sets out the main differences between van leasing and hire purchase van finance options:

Table describing the differences between van leasing and hire purchase finance options

Key takeaways…

Hire Purchase:  May be the ideal option for you if like the idea of owning your vehicle, or plan to sell it for profit once you’re finished with it.

Contract Hire:  May be the right option for you if want to take advantage of lower monthly payment and taxation. There is less risk, and you can hand back the vehicle once you’re finished with it (although it will be subject to excess mileage and damage charges).

Finance Lease:  If you want the best of both worlds, this van leasing option may be right for you. You get to take advantage of low monthly payments and taxation, with more flexible contract terms.

Need more information on our finance options? Check out our Finance page for more details. Want to discuss Leasing Deals? Contact Us or call 01179625314 to speak to one of our Van Specialists

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