Saturday, April 21, 2012

Buying A New Commercial Van

Buying a van is a big investment for any business, and particularly for a small business. It is something where you simply cannot afford to make a mistake. Here we will look at some of the important considerations when looking for commercial vans and we will outline how you can find good van deals.

The first decision you will need to make is whether to buy a used van or a brand new one. Naturally it will cost you much less in terms of outlay to buy a second hand van, but if you ended up with one that was unreliable then it could cost your business much more. Vans do tend to get mistreated, so buying a used one always carries a degree or risk.

Customer perception is also very important. Your customers would be much more impressed if you turned up on the job in a smart new van, possibly with your company logo on it, than they would if you turned up in a van that looked more than a little worse for wear.

The next decision is whether to purchase the van with cash or a bank loan or whether to finance it with a leasing deal.

If you purchase a van outright, then it has an immediate impact on your business assets. You are converting cash into an asset that will appear on your balance sheet, and one that will depreciate rather quickly. That might not be a problem, but potentially it could be. You will be able to charge depreciation of the van on your annual accounts, but you will need to add that amount back to the profit side of your P&L and pay corporation tax on it. You will need to cover the depreciation from a cash point of view by claiming a capital allowance; which is all a little complicated. Also, having a rapidly depreciating asset on your balance sheet might go against you if you are trying to take out a bank loan, particularly in today’s financial climate. The plus side is that you will be able to reclaim VAT.

The alternative is to lease you new van. Many small businesses find that this is by far the best deal. A leased van does not appear on the balance sheet, and the cost of leasing is simply a monthly payment that you treat as a business expense. There is no need to finance the cost of the van up-front, so you will have access to more cash for growing your business. Furthermore, you only need to finance the van’s depreciation. Leasing charges are based on the depreciation of the van over the leasing period, and once the lease has expired, you can simply return the van to the dealer and lease a new one if you need to. Also note that you will not need to pay VAT on a leased van.

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