company van - best way to finance

clare_bear_2

[FONT=Arial, sans-serif]We are looking to purchase a van soon at work but we are pretty confused with the various finance options and appreciate any advice anyone can offer a there seem to be so many different options....

We are budgeting on monthly payments of around £250/300 a month and a deposit of around 3 payments but it will be unlikely that we will have cash to make a large final payment.

We are VAT registered and expect to do around 25,000 miles a year - all the finance deals seem to give the example of 10,000 miles but state other options are available
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[FONT=Arial, sans-serif]descriptions below are my understanding having carried out a bit of research...[/FONT]
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Option 1
Take out a loan and purchase a second hand vehicle - this seems to be the most straightforward option and we will have an asset on our books but we would be buying a second hand vehicle with little or no warranty so it could be risky... is VAT paid on second hand vehicles?

Option 2
Hire Purchase
VAT is paid up front (I have a feeling this cannot be reclaimed on new cars – is it the same for vans?) plus a deposit, you pay a monthly fee for a fixed period, at the end of the period you own the vehicle – I am assuming the monthly payments would be pretty high on a new vehicle so this option is probably not going to be available to us, plus it might be a struggle to find the cash to pay the VAT[/FONT]


[FONT=Arial, sans-serif]Option 3
Lease Purchase
VAT is paid up front along with a deposit – sounds similar to HP except you are required to sell the vehicle at the end of the period to meet the terms of the agreement but it can be bought back for a nominal figure of £1, therefore you still own the vehicle[/FONT]
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Option 4
Finance Lease[/FONT]
[FONT=Arial, sans-serif]Vat is paid on monthly payments not up front, you pay a monthly fee for a fixed period, at the end of the period you sell the vehicle to pay off the balloon payment, this seems risky to me as I assume there are no guarantees that the vehicle will have any residual value at the end of the term so if you sell it for less than the required balloon payment I guess you have to stump up the extra cash....

Option 5
Contract Hire
you pay a monthly fee for a fixed period and hand the vehicle back at the end of the term - you can normally include maintenance but mileage charges may be an issue, I assume VAT is paid on the monthly payments and we could claim it back?

Option 6
Contract Purchase
VAT is paid up front plus a deposit, pay a monthly fee for a fixed term, at the end of term you can either hand the vehicle back and owe nothing or pay the balloon figure[/FONT]


[FONT=Arial, sans-serif]I appreciate your thoughts on what you guys consder the best option for a business, i realise we need to obtain quotes from different companies to suit our needs but we want to have a good idea of what is best for us before we start as i'm not sure we would get honest advice from the guys trying to sell you the vans....[/FONT]


[FONT=Arial, sans-serif]thanks in advance, clare
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bengalknights

You can reclaim the VAT 100% on a van as its for business purposes but only 50% for a car unless you can prove its being used for business only.

http://www.hmrc.gov.uk/vat/managing/reclaiming/motoring.htm

The option to go for would be basically the cheapest option you can find and what type of van it is your requiring.For example a large fan like a ducato can be had for £190-£215 a month where as a sprinter would be more like £370-£400 and it would be the same for small vans like the berlingo £80-£120 and the caddy £140-£180 based on your 25k year mileage with the service etc thrown in.

clare_bear_2

i have been looking all morning at second hand vans - we don't want a rear wheel drive van (to high up to load) so we are limited to the citroen/renault/fiat lwb high roof with a min of 13m3 load capacity - there are very few available second hand - anyone know if there is a reason for this i.e. is it because there are far more fords and mercs out there or is it because they don't last more than the warranty period?????

anyway any more advice on best finance options for a business is appreciated, i will keep looking for deals and have a look at what we can afford re new vans through finance...

i also need some help/advice with insurance, i have used the site go compare - the cheapest quote came in at 2.5k - this seems ridiculous and quite simply unaffordable so we have now got our broker on the case (we also have a company car insured for any driver over the age of 25) - waiting to hear back from them, we need to insure 5 drivers all over the age of 25, i am almost certain everyone has a clean full licence but i do need to see all the licences to double check...

thanks again for any van advice!

paddedjohn

commercial vehicles are subject to vat when buying and selling, this should be 100% reclaimable through your business.

antrobus

bengalknights wrote: »

You can reclaim the VAT 100% on a van as its for business purposes but only 50% for a car unless you can prove its being used for business only.

http://www.hmrc.gov.uk/vat/managing/reclaiming/motoring.htm

That only applies to leasing payments. Generally speaking you can't reclaim the VAT on purchasing a car unless you meet certain conditions.