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How to finance a business van for your small company

So you’ve started your own business, written your business plan, what’s next? If you don’t already own a van, you may want some advice on how to choose the van that’s right for you. 

If you’ve already set your sights on your dream vehicle, financing a business van for your small company is probably at the top of your to-do list. Here is a primer on a few of the choices available to you and some issues you need to consider.

Financing a business vehicle with an outright purchase

Let’s get the most obvious, but also the most difficult option out of the way: very few start-ups find themselves in the enviable position of having enough cash on hand to fund a business vehicle with an outright purchase. You could, of course, raise the required funds the old-fashioned way, through a bank loan, or through a crowdfunding campaign at the other end of the modernity stakes. If you want the freedom and flexibility to source and run the cars yourself, then an outright purchase is for you. But even if you do have the necessary capital on hand, don’t rush to a dealership just yet. There’s the value depreciation and increasing maintenance costs over time to consider, and the prospect of starting all over again when it’s time for a replacement. Moreover, your funds might be better used on other investments if you are at the very start of your business journey.

Financing a business van for your small company is probably at the top of your to-do list
Financing a business van for your small company is probably at the top of your to-do list

Financing a business vehicle with contract hire

Contract Hire is an option whereby you pay an agreed rental for a fixed period. You pay an amount up front (e.g. 3–12 months equivalent) and then a fixed monthly amount thereafter until the end of term. At which point the vehicle is simply returned, with any excess mileage or damage charges payable. This option especially makes sense for early-stage small businesses seeking to reduce financial risks as well as the administrative load of purchasing, maintaining and eventually disposing of a company vehicle. As an added bonus, overheads like road tax are rolled up into the one package. If predictability is an important business requirement for you, Contract Hire could be an attractive choice.

Funding your business vehicle with hire purchase

Hire Purchase is one of the simplest ways to finance your business van. For one, you can tailor the agreement to your available capital and revenue funds: choose the initial deposit value, and your finance provider will calculate your monthly payments based on the remaining value of the vehicle and length of the agreement. Some contracts include an option to return the vehicle once you have paid half of its value—another source of flexibility. Hire Purchase will be attractive to traders who need the flexibility of being able to pick the deposit amount, and value the certainty of fixed repayments and interest rates. 

 Very few start-ups find themselves in the enviable position of having enough cash on hand to fund a business vehicle with an outright purchase
Very few start-ups find themselves in the enviable position of having enough cash on hand to fund a business vehicle with an outright purchase

Finance lease option for business vehicle finance

Renault Finance Lease combines some of the benefits of Contract Hire with some of the flexibilities of Hire Purchase. You decide on the initial deposit and monthly payments are calculated by taking into account the remaining value of the vehicle, the term of the agreement and annual mileage allowances. You have full use of the vehicle during the finance lease period. At the end of the finance agreement the vehicle is sold to a third party by Renault Finance. If the sold price is above the pre-determined balloon payment then Renault Finance will refund a percentage of the proceeds back to you, if the sale price is below the balloon payment then you will be liable to pay the shortfall to Renault Finance. There is also the option to maintain the lease of the vehicle over an agreed period for a nominal annual fee.

A final way to raise finance: lease purchase

The Lease Purchase option is also sometimes called “Hire Purchase with a balloon”. You get the same fixed repayments and fixed interest as a straightforward Hire Purchase, with the option to defer some of the vehicle cost until a final “balloon” payment, upon which the vehicle becomes yours. This approach has a direct benefit, which is to reduce monthly payments and therefore improve your cash flow. Lease Purchase can be a brilliant choice for start-ups that experience tight cash flow in the early stages, but feel confident about their prospects of increasing profits over time. 

Overall, there is a great range of options for financing a business van for your small company. At Renault, long experience tells us that since every business is unique, your final choice is a matter of what your particular business needs at the moment. Whichever option you choose, our teams are here to help design the agreement that best fits your passion and your business.