If you are self-employed, then the chances are you will need a vehicle. And there’s a chance that the vehicle you need is a van.
You have a few choices when looking at vans. For example, do you want a brand new van? Or a nearly-new van? Or perhaps you want to look at an older used van. We recommend looking at a new or nearly-new van, as these are more economical, they are more reliable and they present a good company image. They are also less likely to be in and out of the garage costing you money.
Another advantage of new or nearly-new vans is that they can be leased. Van leasing for the self-employed sounds daunting, but it really is quite simple.
In this article, we are going to look at van leasing for the self-employed including how van leasing works and how to go about getting approved for finance.
How does van leasing work?
Van leasing works in a similar way to car business car leasing. There are two options available to you; Contract Hire and Finance Lease.
Contract Hire is the most common form of leasing and involves you having a van for a set period of time while paying a fixed monthly fee. Once that time is up, you hand the van back with nothing else to pay. When you have a Contract Hire you are subject to mileage and condition restrictions. You agree to a set mileage, and if you go over this mileage then you will be subject to an excess mileage fee. You are also obliged to keep the vehicle in a condition that is in line with the BVRLA Fair Wear and Tear Guide. When the time comes to hand the vehicle back and the vehicle is damaged beyond the Fair Wear and Tear Guide then you will be subject to damage charges.
Finance Lease is more popular for van leasing as there are no mileage or condition restrictions. It works in a similar way to Contract Hire in that you have a van for a set period of time while paying a monthly fee. When that time is up, you will have a final, slightly larger payment, called a balloon payment. You will have to find someone to buy the van off the finance house in order to cover the final rental. If you sell the van for more than the balloon payment then you get to keep the equity. If you do not, however, then you will have to top the remainder yourself.
Alternatively, you can pay a small fee, usually one monthly payment, and keep the van for another year. This is called a peppercorn rental and you can do this for as long as the finance house allows, but you will still have to find the money for the balloon payment.
You can read more about Finance Lease here or watch our video below.
Who qualifies for van leasing?
If you want to lease a van through a business, then you can do so as long as you are one of the following;
– An Embassy
– A Charity
– Part of Central Government
– Sole Trader
– Are in a Partnership
– Have a VAT registered business
– A Local Authority
– A PLC
So if you are self-employed, then you qualify for leasing a van.
How does van leasing for the self-employed work?
If you are self-employed then there should be no reason why you would not qualify for van leasing. Here is how it works;
You will find a vehicle broker who is trustworthy and has experience in business and van leasing. You will discuss your requirements and your budget and they will find you the best deals. You choose which deal you want and then you will go through a credit check to see if you qualify for finance.
The finance house will have to be sure you can make the monthly payments, and will often ask to see certain documents in order to determine this. In most circumstances, you will have to provide your latest set of financial accounts, of which are hopefully showing a positive net-worth. You will need to provide a proof of address and a proof of ID for the Sole Trader. You may also be asked to provide your latest bank statements. Both the business and the persons named on the proposal form will be subject to a credit check.
As long as you have a strong credit score and the finance house is confident that you can make the monthly payments, then there is no reason why you should not qualify for van finance.
Can I lease a van if I have bad credit?
If you have bad credit then it can make things slightly more difficult. This is because the finance house need to make sure that you will be able to make the monthly payments and they do this by checking your credit score. If you have a bad credit score then they can’t guarantee you will make the monthly payments. Check your credit score here.
If you do have bad credit, then it’s not the end of the world. However, it will make things more difficult. The best thing to do is to go through a trustworthy and experienced broker who has the expertise to work with those with bad credits. They will be able to work with finance houses who have experience with bad credit and will be able to help you out. If you have bad credit but you can make the payments, then there is still a chance that you will be able to lease a van.
However, it might be more expensive because you are a greater risk. But, it can still be done. If you cannot get finance for van leasing, then your alternative is looking at buying a used van.
Will I have to pay company car tax on a van?
If you have a van that you are using for personal use, which means using it on the weekends and for personal trips, then you will have to pay company car tax.
However, company car tax works differently with vans than it does for cars. This is hugely beneficial as it works on a fixed BIK rate. This is opposed to company car tax on a car, which works on a sliding BIK rate that is dependent on how much CO2 the car emits.
With a van, you instead have a fixed rate of £3150. You will pay a percentage of that depending on your personal tax bracket. So if you pay 20% tax then you will be paying £630 a year, or £52.50 a month.
If you have an electric van, then you will pay a percentage of £630, either 20% or 40%. You can have a look at our top electric vans here.
This is a brief overview of company car tax for vans so for more information we recommend you read our article dedicated to the topic.
In conclusion, you can get a van lease if you are self-employed. As long as you can make the monthly payments and the finance house are confident you can make the monthly payments then there should be no problem. You will have to provide extra documentation than if you were leasing privately, but this is all very standard for a business lease and is not strictly for those who are self-employed. If you do have bad credit then it will make leasing harder, but not impossible. You may have to pay more monthly or put down more initially, however. The key is finding an experienced and trustworthy vehicle broker who will be happy to help you and work out something that is best for your situation.