Small Trader needs new van - loan or finance deal?

Jitkab

My partner is a small trader with his own Electrical business. He desperately needs a new bigger van. We are debating the pros and cons of a Personal loan, taking advantage of current low rates, to purchase a "new" secondhand van for about £18k in total. Or do we go for one of the finance deals (contract lease, contract hire or hire purchase) which to me seem like really expensive options.
He is not VAT registered and of course would like to use this expense in his books.

I tried to calculate the TOTAL actual cost and if he would get the low advertised loan rate, his overpayment would be around £900. But monthly repayments are higher than finance options. However at the end of the loan (5 years) he would still have a van with some market value. While with finance deals he would get a brand new van, but total cost would be around £24k .

I feel that he still has to physically earn every single pound and getting loan and paying less in total seems like a better option to me. But am I right from the business point of view? Would the reduction in income tax payment due to increased cost justify the higher total price or is the loan a better option?

What do you think???

WellKnownSid

A lot depends on how the business is structured - sole trader or limited company. Sole traders have the option of using simplified expenses whilst ltd companies will almost certainly want everything off the balance sheet for CT reasons.

Lease deals are normally much cheaper than any other form of financing - IF you know what you're doing.

One for your accountant, perhaps?