Can I Get Van Finance on a New Company?

Introduction

Starting a new company is an exciting venture that comes with various challenges, including the acquisition of necessary equipment and vehicles. For businesses in the transportation or delivery sectors, having a reliable van is essential for day-to-day operations. But can a new company secure financing for a business van? The answer is yes, and this comprehensive guide will help you understand the world of business van finance for your new company.

Understanding Business Van Finance Options

When it comes to financing a van for your new company, you have several options at your disposal. These options typically include:

1. Hire Purchase (HP)
2. Finance Lease
3. Contract Hire
4. Lease Purchase
5. Personal Contract Purchase (PCP)

Each of these options has its pros and cons, and understanding the differences will help you choose the best fit for your new company’s needs and budget.

1. Hire Purchase (HP)

Hire Purchase is a popular finance option for businesses looking to own a van outright at the end of the agreement. With this method, you make an initial deposit (usually around 10%-20% of the vehicle’s value), followed by fixed monthly payments over a specified term (usually between 2 and 5 years). Once all payments have been made, your new company will own the van.

Pros:

• You will own the van at the end of the term.
• Fixed monthly payments make budgeting easier.

Cons:

• Higher monthly payments compared to other finance options.
• The van’s value may depreciate significantly over time.

2. Finance Lease

A Finance Lease allows your new company to rent the van for a fixed period without the commitment of ownership. You will pay an initial deposit and then monthly payments for the lease term. At the end of the term, you can either sell the van and settle the outstanding amount, or continue to rent it by paying a “peppercorn” rental fee.

Pros:

• Lower monthly payments compared to HP.
• Flexible terms and end-of-contract options.
• VAT-registered businesses can claim back VAT on the monthly payments.

Cons:

• You will not own the van at the end of the term.
• May require a larger initial deposit.

3. Contract Hire

Contract Hire is another rental-based finance option, with fixed monthly payments for a specified term (usually between 2 and 5 years). At the end of the term, you simply return the van to the leasing company. Contract Hire often includes maintenance and servicing costs, making it an attractive option for new companies.

Pros:

• Low initial deposit and fixed monthly payments.
• Maintenance and servicing costs often included.
• No need to worry about vehicle depreciation.

Cons:

• You will not own the van at the end of the term.
• Excess mileage and wear-and-tear charges may apply.

4. Lease Purchase

Lease Purchase is similar to HP but with an additional balloon payment at the end of the agreement. This means lower monthly payments, but a larger lump sum to pay at the end if you want to own the van.

Pros:

• Lower monthly payments compared to HP.
• The option to own the van at the end of the term.

Cons:

• Balloon payment required to own the van.
• The van’s value may depreciate significantly over time.

5. Personal Contract Purchase (PCP)

PCP is a flexible finance option where you pay an initial deposit, followed by monthly payments over a fixed term. At the end of the term, you have the option to either pay a balloon payment and own the van, return the van, or use any equity towards a new finance agreement.

Pros:

• Lower monthly payments compared to HP and Lease Purchase.
• Flexible end-of-term options.
• Potential for equity to be used towards a new finance agreement.

Cons:

• Balloon payment required to own the van.
• The van’s value may depreciate significantly over time.

Factors to Consider When Choosing Business Van Finance

When deciding on the best finance option for your new company, consider the following factors:

1. Ownership: Determine whether your company’s goal is to own the van at the end of the term or simply rent it for a fixed period. This decision will help you choose between HP, Lease Purchase, PCP, Finance Lease, and Contract Hire.
2. Budget: Consider your new company’s budget constraints when deciding on a finance option. Take into account the initial deposit, monthly payments, and any balloon payments required.
3. Mileage: Consider your company’s estimated annual mileage, as excess mileage charges may apply for rental-based finance options like Contract Hire.
4. Maintenance: Evaluate whether your new company has the resources to maintain the van or if a finance option that includes maintenance and servicing costs, like Contract Hire, is more suitable.
5. Flexibility: Assess the flexibility you require in terms of contract length and end-of-term options. Finance Lease and PCP offer more flexibility in this regard.

Tips for Securing Business Van Finance for a New Company

As a new company, securing financing for a business van may seem daunting. However, by following these tips, you can improve your chances of obtaining a favorable finance agreement:

1. Prepare a solid business plan: A well-prepared business plan can help demonstrate your new company’s potential for growth and profitability, increasing your chances of securing financing.
2. Check your credit score: A good credit score can improve your chances of obtaining a favorable finance agreement. If your personal credit score is low, consider using a co-signer with a strong credit history or work to improve your credit before applying for finance.
3. Shop around: Compare finance offers from different providers to find the best deal for your new company. Don’t be afraid to negotiate for better terms.
4. Provide a larger deposit: A larger initial deposit can improve your chances of securing finance and may result in lower monthly payments.
5. Consider a guarantor: If you’re struggling to secure finance due to your new company’s lack of credit history, consider using a guarantor with a strong credit history to back your application.

Conclusion

Securing finance for a business van is possible for new companies, with various finance options available to suit different needs and budgets. By understanding the different finance options, considering key factors, and following our tips, you can secure the financing you need to get your new company’s van on the road and contribute to your business’s success. For more information visit our page about van finance for a new business.

Partnering With a Business Van Finance Specialist

Business financing specialists such as the team at First Oak Capital can help you find the right business van finance product for your new business’s needs. Get in touch with our team at 0800 066 3677 or get a quote to get started today!