Leasing is popular for vans because it keeps monthly costs predictable and, for VAT-registered businesses, the VAT on the rentals is usually reclaimable. You never own the van, though. This guide explains contract hire, finance leases and personal leasing, and what to watch for at the end.
In short
With van leasing, you pay a fixed monthly rental to use a van for an agreed term, then hand it back. Contract hire is the most common type. With a finance lease, you share the van’s sale value at the end instead of handing it back. Either way, you don’t own the van.
How van leasing works
You agree a van, a term (usually two to five years) and an annual mileage. You pay an initial rental, often three, six or nine months’ worth, and then fixed monthly rentals. At the end, what happens depends on the type of lease.
Contract hire
Contract hire is the most common van lease for businesses. Business contract hire is for businesses, and personal contract hire is the version for private buyers.
- You pay fixed rentals and hand the van back at the end.
- You agree an annual mileage, and pay a charge per mile if you go over.
- The van must be returned in good condition, allowing for fair wear and tear. Damage beyond that is charged.
- Maintenance packages are often available for an extra monthly cost.
Finance lease
A finance lease is a business-only product, usually for VAT-registered businesses.
- Your rentals cover most of the van’s value, and there’s often a final rental at the end.
- At the end, the van is sold to a third party and you usually receive most of the sale proceeds back as a rebate of rentals. You can’t buy it yourself.
- You carry the risk of the van’s value, but you have more flexibility over mileage and condition than with contract hire.
VAT on van leasing
If your business is VAT-registered and the van is used for business, you can usually reclaim the VAT on each rental in full. For cars, the reclaim on lease rentals is normally limited to 50%. If the van is also used privately, the reclaim may need to be reduced (Commercial Vehicle Contracts). Check with your accountant.
Pros and cons of van leasing
Pros
- Fixed, predictable monthly costs
- VAT on rentals usually reclaimable in full for business vans
- Hand the van back at the end, with no resale to worry about on contract hire
- Optional maintenance packages
Cons
- You never own the van
- Mileage limits, with charges for every mile over
- Damage beyond fair wear and tear is charged at the end
- Ending early can be expensive
What to check at the end of a van lease
Before you hand the van back, compare its condition with the BVRLA fair wear and tear standards, fix minor damage where it’s cheaper, and keep the service history up to date. Check your mileage against the agreed limit well before the end, as some leasing companies will let you adjust it during the agreement.
Van leasing FAQs
Can I lease a van as a private buyer?
Yes, through personal contract hire. You won’t be able to reclaim VAT, and rentals are quoted including VAT.
What happens if I go over my mileage on a van lease?
You’ll pay an excess mileage charge for every mile over the agreed total. The rate per mile is set in your agreement. If you think you’ll go over, ask about changing the limit early.
Can I end a van lease early?
Usually only by paying an early termination charge, which can be a large share of the remaining rentals. Check the terms before you sign.
Can a new business lease a van?
Often, yes, but leasing companies may ask for a larger initial rental, a director’s personal guarantee or evidence of income if the business has a short trading history.