Van leasing advice for start-up businesses
24/04/2017 Share
Van leasing advice for start-up businesses
Updated November 2023
Table of Contents
1. How van leasing could help your business
2. What you need to know before leasing a new van
3. Documents required for a new van leasing application
At the end of the 2023 financial year, there were 801,006 company incorporations registered. An increase of 6.4% compared to the previous financial year.
The data published by Companies House also shows that 16,978 companies were incorporated between January and March 2023.
Registrations continue to grow as people take their chance to chase their dreams and work for themselves. While these are all valid reasons to consider starting a business, once you've created everything the hard work really starts.
For a lot of businesses, a van is a vital asset. It's a tool that facilitates your trade, rather than a means of commuting to and from work. Function over fashion, as it were. The costs associated with starting a business could leave you struggling to afford a new van. Enter van leasing.
How van leasing could help your business
By leasing you'll get a brand-new van at a much lower cost than if you were to buy the van outright. Van leasing is all about flexibility. You have the freedom to choose your contract term, initial rental, and annual mileage. Plus, the added bonus of changing your van every few years.
Van leasing requires an initial rental at the start of the agreement. This is then followed by regular monthly rentals for the duration of your lease.
Lease terms can last from two to five years and at the end of the term the van must be sold to cover a 'balloon payment'. The balloon payment is calculated using the age of the van at the end of the agreement, along with its projected mileage. It's not uncommon for businesses to make a profit on the sale if the van is in good condition and the end mileage is less than expected.
Depending on how your business is set up, there are potential tax benefits associated with leasing a van, rather than buying one. Especially when the van is purely a working vehicle.
What you need to know before leasing a new van
It's not as simple as heading online or making a phone call. As a start-up, getting approved for van finance can prove difficult. This is because a finance company needs to assess the risk of you defaulting on your commitments.
As a new business, you will have a short trading history. This means a finance company has no evidence of how the business keeps up with financial obligations.
This isn't a dead-end, but there are a few things to consider and prepare for when applying to lease a van. Always make sure you have the right documentation. This will improve your chances of approval.
Documents required for a new van leasing application
You should prepare proof of the following when applying for van leasing:
- Three-year address history
- Proof of UK residency
- Full UK driving licence
- No current CCJ's or mortgage arrears
- Opening balance sheet
- Proof of positive trading
- A director who can act as a guarantor
You should also consider the following:
- Previous business history. If you were in a partnership or operated as a sole trader and have now become a limited company with the assets transferred. Making it the same company but a new entity.
- Where initial investment is considerable and can be proven in the opening statement of affairs.
- Poor credit history or failed businesses
Even if you have all the specified information above readily available, some finance companies have a policy of not financing businesses that have been trading for under two years.
Finally, there are harsh penalties for early termination of most van leasing agreements. You must be certain that you can afford the monthly rentals for the duration of the agreed term. As a start-up, this can be difficult to judge as your future is uncertain. Be sure that you can comfortably afford your van leasing agreement, so you don't over-commit your business's cash flow.
Ready to lease a new van?
At Vansdirect, we have a huge range of new vans to choose from. Whether you’re looking for a small, medium, or large van – you are sure to find the right one for your business. Ready to switch your business to electric? We also offer a range of electric vans.
If you need advice we’re here to help. Find out more information on van leasing or contact our expert team.
In addition to van leasing, we also offer a range of finance options. These include Contract Hire and Hire Purchase. Find out more about van finance.
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