As the owner of a new enterprise, deciding on the right business van finance deal can be one of your earliest and most crucial money management decisions. There is a wide range of choice, and the one that you pick will have a big impact on the viability of your business.
For many craftsmen starting out on their entrepreneurial journey, a business van is not a luxury but a necessity. The question, therefore, is not whether a van is affordable, but how to finance it. Naturally, this will depend on your current financial position; but your budgeting and cash flow forecasting will probably be the deciding factors in the choice you make. Here are some typical business van finance deal scenarios that might strike a chord with your situation.
Hire purchase: the right business van finance deal if you have capital to invest
A straightforward hire purchase deal remains a good choice for entrepreneurs with capital to invest up front and who, in the early stages, feel the need to keep monthly outgoings as low as possible. One possible configuration with a Renault Finance deal could involve paying a deposit in the amount of your choice, followed by fixed monthly payments over a 1- to 4-year period.
If your cash flow forecasting points to slow and/or unpredictable income in your setting-up phase, this type of finance deal could help you keep monthly outgoings fixed, and low. At the end of the relevant period, payment of the Option to Purchase fee secures ownership of the van.
Contract hire option: low initial investment and low-risk business van finance deal
The contract hire option is a popular choice with entrepreneurs who lack a significant sum to invest at the beginning and want to avoid the risks associated with vehicle ownership. This could suit you if you are confident you will see a steady flow of income and outgoings, but you wish to avoid sudden financial surprises or unforeseen outgoings due to low contingency funds. A Renault contract hire deal includes the Road Fund Licence, and gives you the option to include servicing, maintenance and tyre costs in a single financial package.
From an accounting standpoint, contract hire vehicles have the advantage of being classified as “off-balance-sheet”; another bonus is that, if they are used solely for business and you are VAT registered, you can claim 100% of the VAT back. At the end of the hire period, you simply return the vehicle.
Finance lease: a more flexible business van finance deal
Finance leasing introduces a little flexibility on both sides of the deal. You enjoy more leeway regarding your initial deposit amount, with the benefits of contract hire without the perceived inflexibility. For example, you won’t have to deal with mileage restrictions and, although monthly payments are fixed, they vary according to your deposit amount. There is also the chance to offset some of the costs into a “balloon” payment at the end of the term.
This deal could be your best bet if you clock up high mileage, need foreseeable monthly outgoings and feel confident your cash reserves will improve over time for the final payment. A Renault finance lease deal offers yet more flexibility at the end of the period by giving you the option to sell, return, or keep the vehicle.
Financing a business van with a lease purchase
A lease purchase deal is very similar to hire purchase: you acquire ownership of the vehicle at the end of the lease period, while retaining the option to defer some of the monthly costs in favour of a “balloon” payment at the end. As a result, the lease purchase option offered by Renault involves lower monthly outgoings than for hire purchase.
This could be an ideal deal if you have an amount of capital to invest at the beginning, but you also need to secure the lowest possible monthly outgoings during your business-building period.
The right finance deal for the right vehicle
Putting the right van for your business together with the right business van finance deal are amongst the most important decisions you have to take as a budding entrepreneur. Making the right choices here will stand you in good stead and go a long way to getting your enterprise off to a flying start, and maintaining your business healthy in these crucial first steps.
Renault UK and its affiliates do not provide tax, legal or insurance advice. This material has been prepared for informational purposes only.