There are several different ways to finance the cost of your vehicle including personal contract purchase, van leasing, van contract hire, lease purchase and loans for your van. Many people are confused by the differences in these financing options so I thought I would focus on ‘van contract hire’ and explain how this technique works.

Leasing deals with one of the biggest issues associated with the acquisition of new vehicles and that is depreciation. The value of your brand new van falls through the floor, even before you have driven away from your supplier.

When you take out a van lease the residual value of your selected vehicle is calculated. This is the estimated value of the vehicle at the end of the agreed lease period based on the anticipated mileage during this time. The calculated residual value of your chosen vehicle is then deducted from either the current manufacturers retail price, or a value agreed with the leasing firm, and you will pay the remainder through your monthly lease payments. So the higher the residual value as a proportion of the current value, the less you will need to pay each month.

Contract hire is a vehicle financing method that has maximum benefit for customers who are registered for VAT, so it is most suitable for businesses and the self-employed. If your vehicle is used exclusively for business purposes you will be pleased to find that you can reclaim 100% of the VAT. Even if your van or van is used for some personal use you can still reclaim 50% of the VAT.

A contract hire agreement means that you have actually hired the selected van or van for an agreed period, usually between 1 and 5 years, during which time you will pay the agreed rental, based upon mileage. At the end of the agreed contract hire period, as in the case of van leasing, the vehicle is returned to the supplier. You will not be surprised by any unforeseen disposal or depreciation costs.

Van Contract hire will generally include full vehicle maintenance which can optionally include routine servicing and even replacement tyres. Up to 100% of the rental charges can be offset against taxable profits and minimal capital outlay is required.

It’s no surprise that contract hire is the favoured vehicle financing option for many businesses and self-employed people.

I am often asked whether these types of deals are extended to pick up truck leasing or small van leasing, as opposed to just van leasing. Yes, is the answer, with a host of competative pricing waiting to be discussed by Mark Williams.

For commercial van leasing I would recommend Mark Williams Vehicle contracts.