My Business Needs: Should I Buy or Lease a van for business?
Every financial business situation should be analyzed in order to prevent monetary loss. When it comes to company vehicles, the question of buying or leasing is common. There’s no single answer that covers every situation but let’s break down the differences between the two options. If you’re wondering whether you should buy or lease a van for business, the following should help you decide.
The Difference Between Buying and Leasing
There are two main differences between buying and leasing. The first is ownership. When you end up buying a van for business use, you own it (assuming that you make all of the payments). When you lease a van, you do not own the van. You are essentially renting it from the dealership.
The other difference is your financial responsibility. When you buy, you owe the entire cost of the van. When you lease, you are only financially responsible for a percentage of what the vehicle is worth. This could be a predetermined monthly fee or the difference between what the vehicle was worth when you first leased it and what it is worth when the lease is over.
What Is the Difference Between Business and Personal Leasing?
There are a couple of main types of leases that are used by dealerships, one being more common with businesses than the other. A closed-end lease is typically used by consumers. It’s based on predictable mileage and protects the consumer from unnecessary fees.
In an open-end lease, mostly used by businesses, the number of miles isn’t limited by the lease contract, which is ideal in most businesses because it can be impossible to predict the number of miles that will be driven within a specific time frame.
The other difference to consider is that businesses are usually able to take advantage of tax benefits when leasing a van for business. This isn’t available for personal leasing.
How Long Is an Average Lease Period?
Most lease periods are either 2, 3 or 4 years in length. At the end of the lease period, the lessee can either return the vehicle or purchase it from the owner. This will depend on the market value of the vehicle. In some cases, the vehicle can be purchased and resold for a profit. This is probably the best way to buy a van if you’re self employed because you can give yourself a few years to build up profit in your business before taking on a higher monthly payment.
The Pros of Buying a Van
Buying is often viewed as a great option because your payments are bringing you a step closer to owning the vehicle rather than being used as essentially a rent payment. Here are some of the best pros to buying your van rather than leasing it.
• Modification: When you own your business van, you can modify it as you see fit. This includes having it wrapped to advertise your business on the outside in a professional manner and modifying the inside to best suit your business needs.
• Ownership: Obviously, when you buy a van for your business, you own it. If your driving isn’t excessive and you keep up on maintenance, this can mean that after paying off your loan (if your business needed one) that you can go years without any sort of vehicle payment.
• Freedom: Even the most liberal of leases will have a few restrictions. When you own your vehicle, you don’t need to ask permission or check your contract before going on long trips, performing maintenance or even selling your vehicle.
The Pros of Leasing a Van
Even though leasing is often frowned upon by financial advisors, there are quite a few perks that come along with leasing a van, including the following.
• New Van: If you lease a van for your business, you’ll have a new vehicle that lends a hand to a great first impression by customers. Imagine two equal businesses. One has a new van, the other has an older van covered in dings and rust. Which do you think will have higher ratings from customers?
• Less Maintenance: Nothing can cut into your weekly or monthly profits more than a vehicle in the shop. When you lease, as long as everything has been worked out in your contract, you aren’t financially responsible for repairs and you should be provided with a loaner vehicle while maintenance is performed on your van.
• Few Upfront Costs: This is a huge advantage, especially if your business is new. There are countless other costs so saving on fees can make a difference on your initial success. By avoiding those hefty upfront fees that come with buying, you can focus more on marketing and put your money where it might be more beneficial for the time being.
Which Option Is Best for You?
In the end, deciding whether to buy or lease your business van comes down to several factors, including finances. Purchasing your van is definitely a higher upfront cost and many businesses, especially when just starting out, can’t absorb the cost. This is where leasing can really come in handy. In most situations though, leasing can cost more in the long run.
You also have to consider how important appearances are in your company van. If you want to always have the newest model with plenty of upgrades to impress customers, leasing could be the best way to always making sure that you always have the latest vehicle. But if customers rarely see your van, it might make more sense to buy your van and being okay with driving an older model as the years go by.
If your business works with a financial advisor, don’t hesitate to ask them which option would be in your company’s best interest. Also keep in mind that just because leasing made sense a few years ago, buying could now be the better option.
When deciding to buy or lease a van for business, keep an open mind as you research your options. Visit a couple of dealerships to see what they can offer you. When they know you’re a business, they will be willing to work with you in the hopes of securing future business as well.
Best wishes in securing your business van!