How Does Van Leasing Work?

Van leasing is similar to paying for usage of a truck, car or any other vehicle for a certain period of time.

van leasingMany people confuse van rentals with van leasing. These are two very different concepts. Renting a van means using it for a few days or weeks while leasing a van means paying for its usage for not less than 24 months.

When leasing a van, you don’t actually own it which means there are plenty of benefits.

How Does Van Leasing Work?

The van that you want to lease has a retail price on it- meaning that it would be worth a certain amount of money if it were to be sold at that point in time. Since you are only leasing the van and not buying it, another value is placed on the car. This value is known as residual value.

By definition, residual value is how much the van will be worth, after depreciation is taken into account, at the end of your lease. Your monthly lease payments are based on the difference between the residual value and the retail price. The lease payments will be financed at a particular interest known as lease rate.

Compared to the cost of financing the entire cost of the vehicle, van leasing is much cheaper and this explains the lower monthly payments.

At the end of your lease, you can simply return the van to the leasing company. You also have the option of purchasing the van or renewing your lease at the end of the lease period depending on the type of contract you signed.

Why You Should Consider Van Leasing

There are plenty of reasons as to why you should consider leasing a van rather than purchasing it. For instance, leasing a van is cheaper by 35-55% as compared to financing it through a bank loan. This means you don’t have to worry about monthly payments because they have been significantly reduced to suit your budget.

Maintaining a van can be quite costly and leasing takes care of the cost. Many lease contracts usually come with the option of servicing and repairs. This, however, does not mean that you should choose a van that is in terrible condition because you will end up repairing it more times than you will be using it.

You can access a fleet of luxury vehicles through van leasing. This means that you can drive almost every kind of van model without having to endure the steep costs. You can change the vans as often as every three to four years without incurring any additional costs.

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Unlike purchasing, you don’t have to deal with the depreciating value of a leased van. Buying a van, according to many business owners, is never a good investment because vans don’t appreciate in value. With a leased van, you don’t have to deal with any losses because you have the option of returning the van to the leasing company once your leasing contract is up.

How To Negotiate Van Leasing Contracts

Many factors contribute to the overall cost of your lease and they include:

  1. Interim rent
  2. End of lease options
  3. Penalties for early termination of your lease
  4. Lease rates

There is nothing like a standard lease so you can negotiate almost everything on your lease to ensure that you get a solution that is suitable for your business. As you can see, van leasing rates can be very deceiving because they do not give you a clear picture of how much your actual lease would cost you.

Many van leasing agreements have a high level of risk which must be identified and minimized. You should talk to a trusted financial advisor or lawyer so that they can review your lease before signing it.

One way that you can negotiate for a better lease is by using your credit score as leverage. The higher your credit score, the better your chances will be at getting a better rate.

Summary

Van leasing and van renting are two different concepts and each one of them has its own pros and cons. Leasing is suitable for businesses that want to use a van for more than 24 months without incurring the cost of purchasing or financing it using a bank loan. You can negotiate lease contracts by identifying and minimizing all the risks in the leasing contract.

For more information on van leasing, simply CLICK HERE.

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