The courier’s van is at the very centre of their business. Not only does it perform the essential task of moving goods from sender to receiver but it represents a large cost for the courier business. That cost needs to be wisely handled in order to make the courier business successful. As such, every courier asks themselves, “Should I buy or lease a van?” This article will guide you in choosing the best option by laying out the advantages and disadvantages of each.
What’s the difference between buying and leasing?
The crucial difference between the two is the owner of the vehicle. Buying means that you are the owner of the vehicle. You may buy it outright or take out finance on the purchase. Leasing means that the van leasing company owns the vehicle and you have a contract with them for the use of the vehicle for a period.
Over the years, courier business owners will likely be brought back to the question of, “Should I buy or lease a van?” many times because leasing companies give options to buy the van after the lease term. Leasing companies may also be willing to buy a van from you and then lease it back to you. Depending on the changing circumstances of the courier business, each option might make sense at different times.
What are the advantages of leasing a van?
Easy to change your van
You can easily change your van after the lease finishes for the latest model or a different type of van. The advantage of this is that your vehicle will always have the newest technology and be in near-new condition.
No capital tied up in your vehicles
Leasing can mean that money isn’t tied up in your vehicles but is free to be invested elsewhere.
The depreciation of the leased vehicle which inevitably comes from its increasing age and usage is not something you will need to worry about.
Tax deductions for leasing
You can claim tax deductions on your lease payment for vans used for business.
Some leases allow you to leave all responsibility for maintenance with the leasing company. They will act as your fleet management in a way.
Option to buy the car
Most companies will give you an option to buy the vehicle at the end of the lease period. If in the beginning you couldn’t buy it or didn’t want to, perhaps by the end of the lease period the situation has changed and it is good to have the option to buy.
No need to sell
Since you don’t own the vehicle you will have no responsibility to sell it when you no longer want it.
What are the disadvantages of leasing a van?
It’s not yours
This is a negative in the sense that you don’t have ultimate say in what happens to the vehicle. You will be restricted by the terms of the lease. You may not be able to make modifications to the vehicle to suit your needs. You may not have a say in the maintenance of the vehicle either.
Must keep up with payments
Those monthly payments must be made otherwise you will no longer have the vehicle. Your business’ survival will depend on that. This is also true when you have finance on a vehicle but not if you own it outright.
Credit history required
You may not be able to get a lease if your credit history or current financial situation doesn’t inspire confidence in the leasing company.
Costs to terminate lease agreements
Although you will have a lot of flexibility when the lease expires, if you want to change your vehicle within the lease period you will have to pay a fee.
Before signing your lease agreement you might be required to estimate your mileage. If you underestimate it you may have to pay high fees. If you overestimate it your lease payments might be higher than necessary.
What are the advantages of buying a van?
Free to modify
Since it is your vehicle, you can do anything you like with it to suit the needs of your business.
Make money when you sell
Although it can be a hassle to sell a vehicle, it is possible for you to sell it at a good price. You can also sell it at any time, without waiting for leases to expire.
Maintain it how you wish
Instead of continually paying someone else to maintain the vehicle, a courier who knows what they are doing can take maintenance into their own hands and save money.
No monthly vehicle payments
If finance is not owed on the vehicle then the only costs will be insurance, maintenance, fuel and registration. This means that as long as the vehicle is reliable, the business will likely be saving money on vehicle expenses.
As the van ages, it will decline in value. While this is a negative in some ways it does mean that an old van will not cost as much to insure.
What are the disadvantages of buying a van?
Capital tied up
The vehicles in a courier fleet may represent a very large investment of capital. That money could be needed to pay for other things such as wages, technology or marketing.
Commercial vehicles will inevitably decline in value as they age and as the odometer reading climbs. That means the value of the money that you invested to buy the vehicle will diminish.
Hard to sell
Selling a vehicle can take a lot of time if you are waiting for a good price – time you might not have to spare. On the other hand, if you sell it to a dealer then you will likely not receive the value that the vehicle has on the open market.
Some cars are inexplicably unreliable. If you have the bad luck to own such a vehicle then the costs may be on you.
We hope this summary of advantages and disadvantages has helped you answer the question, “Should I buy or lease a van?” Whether you do buy or lease, be sure to have appropriate insurance for your vehicle. We at GSK Insurance Brokers can help with that. Not only can we find the right commercial vehicle insurance for you but we have put together a full couriers insurance package and can tailor it to your business needs.