Van Finance Explained - Crusader Vans

Van Finance Explained

Van Finance Explained

Financing your new vehicle can be very confusing. Below you will find a brief overview of the differences between the main finance options. If you would like a more in-depth analysis of the options available to you please do not hesitate to contact us.

Although we are able to make suggestions on suitable finance options, finance for business can be complicated and we strongly recommend consulting your accountant to see what is suitable for your requirements..


Hire Purchase
The traditional method of owning a vehicle

The deposit can be any amount although a minimum of all the VAT on the purchase price must be paid. The larger the deposit, the lower the amount you borrow.
Repayment period from 12 months up to 60 months
Monthly repayments are VAT free as the VAT has already been paid
100% of VAT deposit reclaimable for VAT registered customers
100% of interest charges can be offset against taxable profits
Vehicle is an asset on your balance sheet and benefits from writing down allowances
End of the contract period the vehicle is 100% owned by you.

Pro's

Simple method of finance

Vehicle owned on completion of payments

Capital allowances available

If VAT registered, VAT reclaimable at end of 1st quarter

Low interest rates

Con's

On balance sheet form of finance

You are liable for the residual value risk

Large deposit hindering cash flow

No final payment, keeping monthly payments high

Inflexible end of term options


Finance Lease
A flexible way of financing your vehicle

The deposit is the equivalent of 1 – 12 months rental in advance, plus the VAT on this figure
Repayment period of between 24 and 60 months
VAT is paid monthly, then claimed back quarterly (if VAT registered)
Rentals are 100% allowable against taxable profits
Facility can have a balloon profile, which defers a large payment to the end of the contract – thus reducing monthly rental and aiding cash flow
Vehicle sold or part-exchanged at end of contract with the hirer keeping between 95-100% of the sales proceeds (ex. VAT) depending on finance company
Best for non-VAT registered business users looking for low initial deposit and maximum flexibility
No mileage or damage charges incurred at end of contract

Pro's

Fixed term agreement, great for budgeting

Flexible low deposit

You can defer a lump sum payment to the end of the agreement

No fixed annual mileage requirement

Not liable for vehicle damage

Con's

Fixed term agreement

Early termination penalty

On balance sheet finance

You must pay the final payment or re-finance it

You must sell the vehicle at the end of the term


Contract Hire
Straight forward rental

The deposit is the equivalent of 1 – 12 months rentals in advance, plus the VAT for the deposit
Contract Hire is also known as an operating lease but with the added option of a maintenance package.
You dont have to worry about having to sell the vehicle at the end of the contract or any depreciation
Total budgetary control – fixed costs, as long as you stay within the mileage
Monthly repayments are subject to VAT – VAT recoverable
Rentals are 100% allowable against taxable profits
Fixed maintenance package to include services, repairs, tyres, dependant on contract type
At the end of the contract, simply hand the vehicle back
The vehicle is subjected to an inspection, where any reconditioning costs are charged to the customer – Ideal for VAT registered larger fleet operators.
The contract is mileage sensitive.
Off balance sheet funding

Pro's

Fixed monthly repayments

No residual value risk

Breakdown cover and road tax included for the term

Flexible low deposit

Optional maintenance package

Con's

You will not own the vehicle at the end of the agreement

Potential for excess mileage charges

Potential for damage/refurb charges

Early termination costs


Lease Purchase
Another purchase option

Essentially the same as hire purchase but with an optional balloon payment at the end of the period
The deposit can be any amount although a minimum of all the VAT on the purchase price must be paid. The larger the deposit, the lower the amount you borrow.
Repayment period from 12 months up to 60 months
Monthly repayments are VAT free as the VAT has already been paid
100% of VAT deposit reclaimable for VAT registered customers
100% of interest charges can be offset against taxable profits
Vehicle is an asset on your balance sheet and benefits from writing down allowances
End of the contract period the vehicle is 100% owned by you.

Pro's

Simple method of vehicle finance

Vehicle owned on completion of payments

Capital allowances available

If VAT registered, VAT reclaimable in 1st Quarter

Lower payments due to deferred final payment

Con's

On balance sheet finance

You retain the residual value risk

Large deposit

Inflexible end of term options

Reserved for commercial transactions