How does van leasing work?

When we talk about leasing we tend to think of cars, either company or personal. And while cars are the most commonly leased vehicle, vans are often overlooked. You can lease vans as well, and leasing a van is a very viable option for many.

The premise is the same as leasing a car but there are some key differences, particularly when it comes to business leasing.

In this article, we’re going to cover everything you need to know about van leasing, from the different contracts to the benefits.

What options do I have if I want to lease a van?

If you are considering van leasing then you’ll want to know which options are available to you.

The most common option for van leasing is finance lease. With a finance lease, you pay fixed monthly payments for a set period of time, between 1 and 5 years. At the end of the contract, you will have a final rental. This is larger than your monthly payments.This final rental, otherwise known as a balloon payment, is determined by you at the start of the contract, subject to the agreement of the lease company. You can either have a larger balloon payment and smaller monthly payments or a smaller balloon payment and higher monthly payments. If you are leasing a van, then your business can buy the vehicle. Alternatively, you can continue paying the monthly payments on a yearly contract at the fee of one monthly payment (this is called a peppercorn rental) and you can keep the vehicle for one more year. The payment is, in most cases, just one months payment and you can keep the vehicle for another year. You can continue to do this for as long as you like subject to the finance house agreeing, but you will have to pay off the final balloon payment at some point. You can read more about how finance lease is calculated here.

A finance lease is great for those whose vans are going to be doing a lot of mileage or will experience more than fair wear and tear. This is because there are no mileage or wear and tear charges at the end of the agreement. For more information on finance lease you can read our article here or watch our video below. The other option available to you is contract hire. This is the most common form of leasing and our most popular agreement. Contract hire is similar to finance lease in that you pay a fixed fee monthly for your vehicle but at the end, you simply hand the van back. There are, however, mileage and wear and tear charges. So contract hire is best for vans that are not going to be doing excessive mileage or will not be subject to a fair bit of wear and tear. You can find out more about contract hire here.

What are the advantages of contact hiring a van?

There are huge benefits to leasing a van. Some of these include; 

  • You don’t have to worry about depreciation
    • With contract hire, you can hand the van back at the end of the contract and have nothing else to pay (subject to mileage and condition charges of course). This means that you don’t have to worry about the van losing value because you are not the one reselling or disposing of the vehicle.
    • You can also return your van on a finance lease (and there are no mileage or wear and tear charges)
  • If you have a business contract hire, then the finance commitments can be “off balance sheet.
    • This means the liability of the finance doesn’t appear on the company account
  • Company car tax is calculated differently for vans, meaning it’s not affected by the new car tax changes. We’ll go into more detail on this below.

What are the advantages of a finance lease?

There are lots of advantages to finance leasing a van as well, for example;


  • With a finance lease, if you choose to sell the car on, any equity is yours
    • If you sell your van for more than the balloon payment then that equity is yours to keep (minus a small admin fee)
  • Fixed monthly payments make for easy budgeting
    • The price of the monthly payments won’t change for the duration of the contract which is ideal for budgeting purposes
  • The balloon payment at the end of the finance lease is also fixed          
    • Because this is set at the start of your contract, you know exactly how much it will be at the end which again, makes for easy budgeting
  • If you are van leasing and are a VAT registered company, then you can claim 100% of the VAT back on the monthly payments
    • This is if you do not use your van for personal use. If you do, then you can still claim up to 100% back depending on how much CO2 your van emits. For more information on this you can read our article on the business benefits of leasing here.

So as you can see, there are huge advantages to van leasing, particularly if you are leasing through your business.

Company car tax and van leasing

If you are van leasing through your company then you will most likely have to pay company car tax. You have to pay company car tax if you are using your van for personal use, doing the weekly shop or the school run, for example.

However, company car tax for vans is different to company car tax for cars. Instead of a sliding rate that is dependent on how much CO2 your vehicle emits, there is a set rate for all vans. This is £3150, and how much you pay depends on your personal tax bracket.[vc_single_image image=”47302″ img_size=”article-image”]So for example, if you are in the 20% tax bracket then you will be paying 20% of the £3150 which is £630 a year or £52.50 a month.

The exception to this rule is if you have a zero emission van in which case you will pay £630 overall. You can find out our top electric vans here.

This fixed company car tax rate is extremely appealing to many, particularly as the new company car tax changes have come into effect meaning that you could end up paying considerably more for your vehicle.

This is a really brief overview of how company car tax works for vans, so for more information you can read our article here.

Hopefully this has cleared a few things up about van leasing. Though it isn’t talked about as much, van leasing is becoming a popular choice for many. The fact that there are fixed monthly payments is very appealing, as is the idea that you don’t have to worry about depreciation or if you sell your vehicle on, any equity is yours to keep. Plus, you can’t really argue with the business benefits of leasing a van, nor the fixed company car tax rate. We hope that you have been educated on the ins and outs of van leasing, but if you have any questions then don’t hesitate to contact us.

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