A van is an essential tool in improving efficiency in your business. The decision to buy or lease depends on your business needs. Here are tips that will guide you before you make a choice:
Buying a van for business use
Purchasing a van outright is an attractive option for many business owners. However, budget constraints can prohibit buying unless you go for second-hand vans.
Purchasing a van gives you full control of the asset and freedom to brand or sell it whenever you want. There are no restrictions on the mileage, unlike leasing which comes with conditions. You also won’t have to pay monthly lease payments. The only recurring costs will be fuel, maintenance, and insurance cost.
The downside of buying is that a van is a depreciating asset. Therefore, the maintenance cost increases over time. Bear in mind that repair costs and legal expenses can be overwhelming for small businesses. This is why you should be conversant with car buying tips before you buy a van for your business.
Leasing a van for business use
Most lease agreements come with a repair and maintenance package. The running costs are under a monthly payment as per the contract. Therefore, one should not worry about any additional charges.
People who like changing cars every few years find it convenient. Whenever the lease lapses, they can pick another vehicle for hire. Leasing companies have many vans to choose.
Leasing does not require a lot of money since the cost spreads over the lease period. You only pay a deposit, and the rest is in monthly payments. Some lease agreements give you an option to purchase the vehicle after the lapse of the lease contract.
Leasing has some drawbacks including mileage restrictions which attract hefty charges for non-compliance. The long-term contracts may not suit the changing business environments. When struggling with leasing decisions, you can talk to UK van leasing specialists.
The tax advantage of leasing
There are two options when leasing a van. In a finance lease, you can buy the van once the contract ends and claim a capital allowance. In an operating lease, the business leases a vehicle but will never own it. However, the company can claim a tax deduction on the lease payments.
Tax advantages of buying
You can claim the costs of purchasing a business van in the form of expenses in your income tax. If you are using the traditional accounting method, you have the option of claiming the business van as your capital allowance.
As a business owner, you should understand the tax implications for buying and leasing. An accountant may help you examine your balance sheet and weigh your options. Xero Accountants can be of great assistance.
Finding the best option
The choice to buy or lease depends on your preference. A cost-benefit analysis will help you determine the total cost of buying over leasing. Make sure your choice does not affect the financial health of your business negatively. Also look at the van insurance deals on offer, some leasing companies include insurance for the driver.