Why leasing and not buying vans is the best choice for installers

An installer’s van is a vital tool – as integral to their professional existence as their merchant account, Gas Safe card or pipe-cutter. So, when it comes to replacement, it’s a decision worthy of a considered approach. Neil Burroughs – Neil Burroughs Group Sales and Marketing Director for AMT Group – explains why leasing rather than outright purchase is the wise choice for installers.
As a nation, the British have a penchant for owning things. Our predisposition is to aim to own our assets, and it’s no different with vans. We like the idea that it’s ‘ours’ – something of value we can cash in if the need ever arises. But while the security of buying and owning your own van may be enticing, it’s worth considering that your vehicle will depreciate by 30% in the first year after purchase and continue to do so in the same vein each year after that.
Owners should not be fooled — no matter how well kept a van might be, or how few miles it has on the clock, there’s no escaping its inevitable value reduction.
The smarter way to think of a van, or vans, is as a depreciating asset and a business expense, and gear the acquisition method accordingly. After all, why spend hard-earned cash on something that will lose money when there’s an alternative? Leasing.
Firstly, consider the pros and cons. Essentially, they can be summarised under the headings of cash-flow, financial efficiency and convenience.
Managing cash-flow
Cash-flow is the lifeblood of any business, so managing it well is the most important thing to do. Having cash available allows a company to keep moving forward, but it can also give the power to invest in growth opportunities, or to take a wellearned dividend. So, for many, having a clear and reliable view of outgoings is valuable.
With contract hire and leasing, you know your position, month in, month out. Many lease firms – AMT included – can bundle into the monthly cost not only servicing and maintenance but also consumables such as tyres and brakes. It doesn’t take much for unexpected running costs to create a financial stretch so the predictability is a clear benefit.
The low up-front cost is also a benefit as most lease agreements require a minimal deposit and/or initial payment.
Financial efficiency
Although not always the primary motivator, combining the right vehicles with a leasing agreement comes with financial efficiencies. For example, contract hire and leasing rental payments are treated as tax deductible in the profit and loss accounts. This means that 100% of the lease costs can be offset against corporation tax.
Owned vans appear on a balance sheet and are regarded as a debt, whereas contract hire is viewed as an expense in terms of tax and is taken off the balance sheet. This could be important to a business in terms of maintaining a good future financing outlook and debt ratio.
The convenience factor
For some companies, convenience is as important a motivator as saving money. In fact, many SME owners with a multiple vehicle requirement estimate that managing their fleet takes as much as 40% of their time.
Leasing eases this pressure in a number of ways. In addition to the benefits mentioned above, the administrative burden of being responsible for disposing of the van at the end of its life is also removed – simply hand back and start the cycle again with a new vehicle. For those managing multiple vehicles, this benefit alone can save tens of hours per van.
Finally, a common misconception with leased vans is that a vehicle must be left in the ‘naked’ state it was hired in for the duration of the agreement.
This is not always true – signwriting as well as internal racking can often be added to the vehicle as part of the agreement.
Similarly, adding extra security to protect equipment can be incorporated in leasing agreements to eliminate the need for these items to be sourced independently.
So, although it’s natural to take pride in possessions, throwing well-earned money away is simply not good business sense. Having a convenient, time-efficient hiring service with predictable payment costs and readily-available specialist support seems the more sensible option for today’s working tradespeople.