If you’re a small business owner or sole trader in the UK, a van can be an essential tool for your work. It’s not always easy to come up with the cash to buy a van outright, so many businesses choose to finance their vehicles instead. Van finance is a popular option as it allows businesses to spread the cost of the vehicle over several years, making it more affordable. However, before you apply for van finance, it’s important to weigh up the benefits of financing a used van. There are several options available for financing a van, each with its own advantages and disadvantages.
1. Check Your Credit Score
Your credit score is an important factor that lenders will take into account when deciding whether to approve your van finance application. Your credit score is a reflection of your credit history, and lenders use it to determine whether you’re a reliable borrower. Before you apply for finance, it’s a good idea to check your credit score. If you have a low credit score, you may find it harder to get approved for finance, or you may be offered less favorable terms. By checking your credit score in advance, you’ll have an idea of what to expect when you apply for finance. You can improve your credit score by paying bills on time, paying off debt, and avoiding applying for credit too frequently.
2. Choose the Right Type of Finance
There are several different types of van finance available in the UK, so it’s important to choose the right one for your needs. Hire purchase (HP) is a popular option that allows you to pay for the van in installments over a set period of time. At the end of the agreement, you’ll own the van outright. Another option is personal contract purchase (PCP), which allows you to make lower monthly payments and gives you the option to buy the van at the end of the agreement, return it, or trade it in for a new model. You could also consider leasing the van, which means you won’t own it at the end of the agreement but you’ll have lower monthly payments. It’s important to choose the right type of finance for your needs and budget.
Shop Around for the Best Deal
Shopping around for the best van finance deal is crucial to save money and get the best terms. Each lender has different interest rates, fees, and repayment options that may affect your overall cost. Using a broker to help you find the best deal can save you time and hassle, especially if you’re not familiar with the van finance market. Negotiating with lenders is also worth considering, as you may be able to secure better terms by haggling over fees or interest rates. Lastly, using a comparison website can give you a bird’s eye view of the van finance market and help you identify the most suitable deal for your needs.
4. Consider Financing a Used Van
While a brand new van may seem like the best option, financing a used van could be a smarter financial decision. Used vans are typically less expensive than their brand new counterparts, which could result in lower monthly payments and less financial strain on your business. Additionally, you can avoid the significant initial depreciation that brand new vans experience as soon as they are driven off the lot. However, it’s essential to evaluate the condition of the used van and its maintenance history to ensure that you’re making a worthwhile investment. Weighing up the benefits of financing a used van could help you make a more informed decision that could save you money in the long run. Before finalizing any deal, it’s critical to confirm that the van is fit for purpose and has been well-maintained to avoid any potential maintenance or repair costs down the line.
5. Make Sure You Can Afford the Repayments
Before committing to a van finance agreement, it’s crucial to assess whether you can realistically afford the repayments. Create a comprehensive budget that takes into account any other business expenses, such as insurance, fuel, and maintenance. Don’t make the mistake of stretching yourself too thin and leaving yourself with insufficient cash flow to cover your ongoing expenses. Being unable to make repayments on your van finance agreement could lead to serious financial difficulties and even the loss of your vehicle. Ensuring that you can afford the repayments and manage your expenses effectively is essential for the long-term success of your business.
Van finance can be a great way to finance a van for your business. However, before you apply, it’s important to do your research and ensure you’re making the right decision. By following these five tips, you’ll be in a better position to choose the right van finance option for your business.