Van leasing, personal contract purchase, van contract hire, lease purchase and van loans are all different ways to finance the cost of your vehicle. 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 a van basically takes vane of one of the biggest financial issues associated with acquiring a new vehicle which 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 new van lease the residual value of your chosen van or van will be calculated by your supplier. This is the estimated value of the vehicle at the end of the agreed lease period, usually 2 or 3 years, based on your expected mileage in that period. This calculated residual value is then deducted from the manufacturers retail price and the remaining sum is divided up into monthly payments that you will pay over the lease period. So the higher the residual value in comparison with the current value, the less you will be paying 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 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.

In a contract hire agreement you actually hire the vehicle for an agreed period, usually for between 12 and 60 months during which time a fixed rental is paid, based upon the 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 encounter any painful surprise disposal or depreciation costs.

Van Contract hire can optionally include full vehicle maintenance which may include routine servicing and 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. The answer is yes, with competitive pricing available from Mark Williams.

For van lease deals I would recommend Mark Williams Vehicle contracts.