Hi folks. I’m looking for a van at the moment because I’m about to go self employed. I was looking at second hand ones but a few people have asked if I’ve considered leasing one? Can someone explain what are the benefits and pitfalls of doing this? I’m presuming one of the benefits will be that the van will be a new one, but I’m also wondering what would happen if my business didn’t take off and I could no longer afford the payments? I won’t be VAT registered if that makes a difference to anything? So if anyone could enlighten me I’d appreciate it. Cheers.

Depends on what you actually want and how you expect self employment to work – me, personally I hate regular outgoings. Sometimes you need to ride out lean times so having money going out regularly is uncomfortable. I prefer to pay for stuff outright upfront – that to me is more important than getting something new. Moving from salary to self employment for me was all about trying to shed standing orders and DDs.

but I’m also wondering what would happen if my business didn’t take off and I could no longer afford the payments?

What makes you think the business will fail?

Have you have got some savings? If so, buy a van for a couple of grand until you know what money you’ve got coming in/going out. That might be easier said than done if you’re starting with nothing though.

Leasing you can offset the payments to your profits. You’ll be signing up to a minimum term and will have penalties for ending the contract early. Without claiming the vat back it will probably be quite expensive.
Buying the van the costs would be capitalised (asset) to the balance sheet but you could probably claim 100% of the costs against your taxable profits through the annual investment allowance depending on how much you’re spending on other assets. If the business doesn’t take off you still have the van to sell if required

What makes you think the business will fail?

Well worth considering the possibility though, plenty of new business ventures fail every day and I doubt most people had given it any consideration until it was too late….

Have a look here:

http://www.startups.co.uk/van-options-buy-or-rent.html

Well worth considering the possibility though, plenty of new business ventures fail every day and I doubt most people had given it any consideration until it was too late….

All taken care of with a good business plan.

The role the van plays is worth considering too – what do you need it for day to day, will your needs change day to day. For me theres no ‘right’ van – sometimes I don’t actually need to go anywhere at all, sometimes I need to travel long distances carrying very little, sometime I need to carry very big loads.

If the loads and the work load are irregular have a think about a trade account with a good van hire co. I run a transit sized van but then have an account where I can pick up jumbos, 14ft lutons, flat beds, tippers – and just as likely – little runabouts for long distance trips, over a certain radius the hire costs are more than covered by the fuel saving.

All taken care of with a good business plan.

indeed all taken care of. 🙂

I find everything can work out just fine with absolutely no business plan or no life plan whatsoever

indeed all taken care of.

Which isn’t covered in the

but I’m also wondering what would happen if my business didn’t take off and I could no longer afford the payments?

bit. 😕

I find everything can work out just fine with absolutely no business plan or no life plan whatsoever

Agreed, but… 😉

Expand on what line of business has no ‘if’ in it.

The one that has a bit of planning as opposed to the one which puts its finger in the air and hopes.
The business that has customers that are willing to buy the peoduct/service can give you a good idea of projections.
And, of course, you’re right, if is a powerful word.
I just can’t help thinking that if the OP is asking this question, they haven’t got the required confidence in the business. Rather than thinking about how to buy a van they should be thinking about whether there is a business.

The one that has a bit of planning as opposed to the one which puts its finger in the air and hopes.

thats a fairly big inference from the question, I think the OP’s plans extend beyond ‘buy and van and see what happens’

I think the OP is comparing the differing consequences of winding up if you have a wholly owned asset you can sell or a contract you need to negotiate your way out of – and in the case of vehicle that is depreciating, has variability relating to milage and condition etc might have to pay your way out of. Ones a difficult way in and an easy way out, the other is an easy way but a potentially difficult way out

Its an exit strategy – seems pretty sound planning to me.

If you were considering a venture into hits on pro cyclists you are already one step behind the competition

Its an exit strategy – seems pretty sound planning to me.

As previously said, agreed, but I think a lease is only three years, isn’t it?

a lease is only three years, isn’t it?

and?

Your business plan will take account of your first three years of trading, and some.

Dingabell – are you planning on being a sole trader / ltd company?

My only experience was that on startup the cost of leasing for my ltd co was noticably higher than the sticker prices (that excl vat). I gave up pretty quickly. This was several years back mind.

Otherwise – what kind of business – is it regular cash / seasonal? Do you really NEED a van? Could you afford to buy a van personally and charge mileage? Will you use the van for any personal miles (BIK)? Why are you not VAT registered? Do they want a guarantor? Does the lease have to be in your personal name?

All those (and more) are questions an accountant will ask you. I cant advise you really: just remember that leasing companies always make a profit. You have to be sure that it’s going to work for you – not them.

Your business plan will take account of your first three years of trading, and some.

if you say so.

Like I say I don’t and never have had ‘a plan’ so I’ll defer. If you’re sure that having a business plan, even the very, very best means failure is impossible then the world is certain to be anybodies oyster

If you’re sure that having a business plan, even the very, very best means failure is impossible then the world is certain to be anybodies oyster

Gotta love STW.

Guys – seriously – reign it in a bit. The OP is asking for advice. Not entertainment from some random arguing.

Guys – seriously – reign it in a bit.

No point giving the guy advice if there isn’t a business in the first place and as an investor, I’d be out.

Good job I’m not looking for an investor then. I’m going to be starting out as a sole trader doing tiling. It isn’t that I’m expecting the business to fail, more that its a huge change for me coming from being employed by the same printers for 23 years, to being made redundant and having to find a totally new profession to try and pay the mortgage. I was really only thinking of leasing a van because to get a half decent reliable one is probably going to cost me a large chunk of redundancy and I was wondering if there was another way. Looks like I’ll just have to find a cheap one and keep my fingers crossed.

Imagine lease handback time on a van…..bend over!

“I was really only thinking of leasing a van because to get a half decent reliable one is probably going to cost me a large chunk of redundancy “

was it a small redundancy ?

Your tiling – do you need a massive van ? couple of K should see you sweet with an astra/combo/kangoo van.

My mate does the same job from an old polo estate with a roof rack.

Not a tiny redundancy due to the amount of years I’ve put in, but there’s also the cost of the course and all the tools which add up to a fair bit. I also wanted a little bit left to help me through a couple of months when starting out, as I’m sure it’ll take a while to build things up. I’m definitely worrying too much by the sound of it but that’s just me. Cheap van bought outright and see how it goes seems to be the general thinking on here. Good advice about not having regular dd’s etc coming out every month.

For tiling you could get away with a small estate, so just spend £1-2k.

Or tbh you could buy a Van for that too.

Now we have a bit more info, thanks.
No matter what you want to call it, the lease is an investment and the lease company is going to ask you for projections, sales and your business plan that covers the first three years or so.
If this can be covered by the redundancy, then fine.
From LingsCars.com

Lease agreement:
Lease agreements typically stipulate an early termination fee

As others have said a small van for a couple of thousand cash should do until the money starts coming in.
Hopefully you aren’t offended by my bluntness, but it’s tough old world out there and I just don’t think enough market research has been done at the moment.
I do wish you all the success in the world, luck shouldn’t come into it. 😉
Being self employed rocks and you’ll never get me in a contract again.

The thing is with a commercial lease there will be a certain amount of damage allowed but even the most careful worker will have a messy vehicle- do you want that stress at handback?

Buy it, run it/work it. Don’t worry is what I say. Berlingo vans are cheap as chips secondhand.

ok.. tiling..

so your been made redundant and your going on a tiling course..and then your going self employed..

i hope its one mother of a business plan becasue for much of the time your going to have nothing to do but re read the business plan.

tiling is a role for the experienced they charge high and work fast and accurate.. most of the work is add on from kitchen and bathroom fitters who ll either sub contract the work to you or reccomend you to thier customer or finally new to you from a phone call out of the blue.

we dont use a ’tiler’ any more the quality of work was amazing the finish etc first class the cost prohibative when for less than half the price i can get ‘one of the lads’ to do a more than respectable finish.

as for which van.. something small.. or a nice estate car (skoda octavia..) oh and buy out right.. you dont want that bill on the door mat every month.. spend 2k

very very good luck

At the moment my business plan is to try something new, do it to a standard where the customer is pleased with the work and try not to lose my house. Beyond that who knows what the future holds? Maybe in six months time I’ll be starting a thread saying “Isn’t life great being employed”? Here’s hoping 🙂

Sorry for the thread hijack, but it doesn’t really warrant a new one. Can anyone recommend leasing company mailing lists to sign up for decent lease deals or last minute cancellations? I’m looking for a lease in the new year, but I’d rather hold out for a great deal.

Bad news mr dingabell, you currently have a very nice idea but not a business unless you already have customers lined up.
If you email me, I can send you a good business plan outline that will get you thinking about the business with a business mind.
I love the fact that people are starting up and wish them all the success in the world, but that success is going to come from good planning and not good hoping.