Finance Your Next Van With Lease Purchase
When buying a van for your business or personal use, you may not have 100% of the funding you need for your dream vehicle. But that's not necessarily a problem as there are many finance options available to make your purchase a reality.
The choice can be a little confusing and overwhelming; you are not only choosing your next van but also have to decipher and decide between the various finance options available. To help, here is our guide to leasing purchase agreements for your new van.
What is a Lease Purchase?
A lease purchase is a type of finance which is used to buy a van over a set period with monthly payments and a final payment at the end. It's known as one of the most affordable ways to pay for a van as the monthly payments can be lower than other finance options, and the length of the lease purchase agreement can often be negotiated to suit the needs of the buyer. There are 3 parties included within a lease purchase agreement:
One: The customer is also known as the debtor. They pay the deposit, monthly payments and the final payment to become the legal owner of the van at the end of the agreement.
Two: The dealer is also known as a supplier. The lease purchase agreement is offered by the dealer and they also supply the purchased van to the customer.
Three: The lender is also known as the creditor. They collect the payments made by the customer, and will also ensure the customer is eligible for van finance through credit checks.
How does Lease Purchase work?
A lease purchase agreement divides the cost of buying a van into 3 sets of payments:
A deposit is paid before you collect your new van. This flexible deposit can range from 0% to 50% depending on your agreement with the dealer. The higher the deposit you pay at the beginning, the lower your monthly payments will be.
The second part of your payments is monthly instalments. These can be made for 2 to 4 years, and the amount will be agreed upon between the customer and dealership based on the deposit paid and what the final payment will be. The monthly payments are usually less than other car finance options due to the other payments.
At the end of the agreement, the final instalment needs to be made. Often called the balloon payment, it's usually a few thousand pounds and has to be paid. However, if you're unable to make the final payment, there's typically an option to extend the lease purchase agreement by making additional monthly payments or refinancing the vehicle to cover the final payment.
How does a Van Lease Purchase compare to other finance options?
See how a lease purchase agreement compares to other forms of van finance
Lease Purchase vs Personal Contract Purchase (PCP)
Similar to lease purchase, PCP finance options are also split into 3 sets of payments, starting with the deposit (although sometimes there's a no-deposit option on PCP agreements) and monthly instalments. The third and final payment is where these finance options differ. For PCP, the final balance is optional; you can either pay the balance to own the van or hand the vehicle back and lease another van. For the monthly payments, lease purchase finance may be cheaper as the interest rates are often slightly lower. On the other hand, PCP lenders have to account for the risk of the van being worth less than expected when they are handed back to the dealership.
Lease Purchase vs Hire Purchase
Both of these agreements are similar as they end with you owning the van, but the hire purchase agreement differs as there is no large final balance to be paid. Instead, there are identical monthly payments across the length of the agreement, which are generally higher compared to lease purchases as they include the entire van cost.
What are the benefits of a Van Lease Purchase?
There are many benefits to using a lease purchase agreement compared to other finance options to buy your next van including:
Due to lower monthly payments, you could increase your budget to get a better van than you first expected, i.e. newer, bigger or with less mileage. Always talk to the finance provider to understand your options and what is affordable for you.
You will own your van outright at the end of the lease purchase agreement once you've paid the final balloon payment. Once your final balance is paid, you own the vehicle. You can also either sell it back to us, or part-exchange it for money off your next vehicle.
No VAT is payable on monthly instalments.
In the beginning, the lease agreement is flexible and will allow you to adjust the deposit, monthly payments and final payment to suit your needs.
You can pay off the purchase agreement before the fixed term is over and own the vehicle outright earlier than expected. It's worth noting that this may come with early settlement penalties, so it's advised you check your lease purchase agreement documentation.
As you will own the van, in the end, there are no damage or mileage penalties.
What are the drawbacks of a Van Lease Purchase?
There are also some drawbacks of using a lease purchase to buy your next van including:
You must have sufficient funds to pay off the final payment. To note, it may be possible to get another financial agreement to cover the end payment if you cannot, but this is not guaranteed.
Depending on market conditions, the value of the final payment may be higher than the actual market value of the van.
An example of a Van Lease Purchase
Van Lease Purchase FAQs
Can I end a van lease purchase early?
Yes! If you're able to pay the final amount due, then you can end the lease early. To note, some lease purchase agreements will come with early settlement charges so check you're paperwork before agreeing to anything.
Do I own the van outright at the end of the lease purchase?
Yes, you will own your van outright once you have paid the final balance.
Are there mileage restrictions with lease purchase agreements?
No, as you'll own the van after the balance has been fully paid, there are no mileage restrictions or penalties.
What is a balloon payment?
A balloon payment is another name for the final balance that needs to be paid at the end of your van lease purchase agreement.
Talk to us at Carbase | Vanbase
Here at Carbase and Vanbase, we have a great range of used vans ready for purchase. Whether you're looking to purchase outright, or using one of our van finance options available, get in touch with our expert team at Vanbase Bristol today to find the right van for you.
More Helpful Blogs
Sub-prime finance is not guaranteed and may cost more than finance provided by a prime lender. We will try to obtain finance for you but there is no guarantee. It may be from a sub-prime lender, and if so, the cost of finance may likely be at a higher rate than prime lenders offer.
More Useful Articles
Yes, £0 deposit! Here at Carbase, we can help you drive away a new vehicle with no deposit. Check our Car Finance Calculator ...
With a commitment to trust and transparency, we here at Carbase pride ourselves on clear and concise customer service ...
Here at Carbase, we understand that vehicle finance can be confusing, especially if you're in the market for ...