Buying vs Leasing: how much does it cost to run a van?
The thought process between buying and leasing a van can be a long, and sometimes stressful procedure. Van running costs can be complex, but with the right information, it shouldn’t be difficult for you to make a decision.
For those wanting to lease for personal use, it’s a long enough contract to sometimes exercise the thought of buying, despite buying’s drawbacks.
Similarly, for business owners wanting to expand their fleet, the same sort of questions are often posed.
By the end of their lease, how far will they expect their business to have grown? Should this mean a lease is a correct decision to undertake, or would buying a fleet of vans be the more financially viable option?
A lot of this comes down to the costs of running a van. How many miles you expect to do plays a huge part in this decision, but it’s not the only factor.
So, to help you decide which option is best for you, we’ll run through everything you need to know about how much it costs to run a van.
What are the typical van running costs if you buy or lease?
There are plenty of van running costs to be considered when buying or leasing a van.
They are extremely similar to the running costs of a car, yet also slightly differing, which can be confusing if you’ve never owned or leased a van before.
For example, there’s a difference in cost between car and van insurance. Vans surprisingly tend to be much cheaper; a study by popular comparison website GoCompare found that van insurance costs an average of £374 per annum. While car insurance was astronomically higher at £539. However, it’s worth pointing out this was if the van was to be used for social use only.
There are various factors for this, such as where you keep the van (which will be higher if it’s parked on a road as opposed to a drive) and your location in the U.K.
If you were to use the van for carrying goods, or if you were a courier driver, then the average cost of insurance was found to be £1,080.
Furthermore, van tax is usually more than that of cars, unless the car is worth over the hefty sum of £40,000.
Vans registered after 2003 cost just £140 in road tax; however, vans over 1,549cc and registered before 2001 cost a pricey sum of £270 in road tax.
Electric vans are your best bet in terms of reducing costs. Their fuel emissions being zero means they cost £0 in road tax. However, these are more than likely pricier than fuel vans. This is something to take into account.
BIK – or Benefit-in-kind – is another tax you’ll have to pay if you use a company van for private use. This is currently a rate of £3,490, multiplied by income tax (either 20% or 40%), thus equalling a minimum of £698 per annum.
Finally, vans can cost a premium in fuel due to their stocky nature. On average, a 1.5-litre Ford Transit Connect costs around £1 per 10 miles in diesel, as opposed to the larger 2.0-litre Volkswagen Transporter, which weighs in at £1.45 per 10 miles. A sizeable difference if you’re looking to use the vehicle consistently.
What costs will I incur if I buy a van?
The first, and most significant, cost you’ll face during van ownership is the initial purchase. This is usually a hefty lump sum which, if you’re paying in cash outright, can disrupt finances.
You may be able to take out a loan from a van finance lender through hire purchase. Or a bank or a family member, but then you usually have to include the cost of interest on your agreement.
Another cost you’ll incur is servicing and repairs. When you own the van outright, you’re completely responsible for the maintenance of your vehicle.
And if you don’t keep your van in good condition with regular servicing, you’ll void any warranty – meaning the repair costs could become rather unpleasant as time goes by.
What costs will I save if I buy?
Complete ownership of your van allows you to go wherever you want, with no restrictions on mileage, on time, on where you go overseas – the choice is completely yours.
With a lease, there can be stipulations and penalties against this; the van is not yours and therefore despite allowing you to travel wherever, if you decide to bend these rules then there could be extra charges that come your way.
Alongside this, if you want to sell or trade in your vehicle, you can do so. If you own the van, freedom is key, and you aren’t tied down to any contract or agreement.
This means that you can sell your vehicle or use it as a deposit, allowing you to save on the cost of your next van.
Another area you can save if you buy the van outright is taxation if you’re a business owner.
You can claim capital allowances against the purchase of a van, reducing your income tax and therefore potentially saving you thousands.
What costs will I incur if I lease a van?
There are some considerable van running costs to be wary of if you lease. But if you plan correctly, they can be easily avoided.
The main cost you’ll incur if you lease, aside from your monthly repayments and any deposit you wish to make, is if you break the rules of your contract.
With all lease agreements, you’re restricted on the number of miles you can cover each year. And there are rules around the condition you return the vehicle in.
If you exceed your allotted mileage – which is agreed at the start of your contract – you’ll face a pence-per-mile charge.
It’s usually somewhere around 10p a mile, which doesn’t sound much. But if you exceed your mileage significantly, it can quickly add up.
Alongside that, with a lease, you must return the vehicle in the same state you received it. This is minus any fair wear and tear.
So, if you want to add signage to your van, you’ll need to pay to have it removed before you hand the van back.
The same goes for any damage outside of fair wear and tear. If you return the van damaged, you’ll be charged a repair fee.
What costs will I save if I lease a van?
Although there are van running costs to be wary of with a lease, there are also some huge savings to be made.
Firstly is the payment you make. As you never own the van, you only cover the depreciation of the vehicle. This is from the time you take the vehicle to the moment you return it. That means you’re paying much less than if you were to buy it.
And when it comes to the end of your contract you simply hand it back. You don’t need to worry about selling it on and potentially losing money.
Another area you can save is servicing and repairs. As most lease agreements come on new or nearly new vans, they feature the full balance of the manufacturer’s warranty. Meaning if anything was to go wrong, you’d be covered.
As well, you can usually add a servicing package into your lease agreement. This helps you save on time and money when it comes to booking your van in.
Is it better to lease or buy a van?
Now you know the costs, you should be able to decide which is better for you; whether that’s buying or leasing a van.
Ultimately, it always comes down to what suits your budget and circumstances.
If you want to own the van outright and aren’t bothered about depreciation or making a big upfront payment, buying is likely the best option for you.
If you’d prefer to pay less over monthly payments and are confident you can keep to your contract, then leasing is probably the right option for you.
Whichever you choose, we’re here to help
So, whether you decide to buy or lease, we’re here to help. We can offer expert guidance on makes, and models. And give you more information to help you decide which funding option best suits your circumstances.
You can speak to us over the phone, online or via email. Or alternatively, if you think leasing may be the best option for you, you can fill out our online application form. It only takes a few minutes and we’ll send your approval directly to your email.
So, what are you waiting for? Apply Now.