August 25, 2017 at 10:52 AM
First, let’s take a subtle look at the differences between the two
Buying a Van
Buying a van for business use, in blunt terms makes it yours. This venture brings in a vast array of benefits, but the standing order remains that you’ll need to buy it outright, or, you can alternatively, fund its purchase through say a loan for example.
Leasing a Van
Leasing a van for use, on the other hand, is different from buying, for technically, you won’t be owning the van, or rather you’ll be just renting its services, for typically a subtle monthly fee.
Now, we get to see that both buying and leasing also respectively present their benefit and drawbacks. So, exactly what are they, and which option of the two offers the best value?
Why buy a van, what are the pros in buying?
Buying a van tends to bring more of a sense of freedom and autonomy. You will be free of the strict lease contract limits, amongst lots of other benefits, and aesthetically, you will be at liberty to do whatever you like. So fancy scrawling in broad highlights of your business name and number as well on the side, nobody can stop you, for it's now your own property.
Tax advantages of buying a van
In buying a van, we get to see that you can claim the cost incurred as expenses against your income tax bill. Although, how you do so is outrightly dependent on how you pay tax. If traditional accounting is what you use, you can forthrightly claim the van as capital allowance. For the most part, there is not much difference or whether you are using the cash basis accounting system that is unless you are using simplified expenses thereof. Additionally, there is always the option to sell your van later on, should you need a cash injection.
Why Lease a van, what are the pros in leasing?
Leasing, for the most part, does not require huge chunks of money, whether from your own coffers or a loan. The cost normally is spread out over a fixed term period of a contract, as is stipulated thereof. All you’re required to do is put up a deposit, which typically is not too big or startling. Maintenance costs, on the other hand, tend to be covered by the leasing company, so that’s one worry off your list. And should you somehow grow attached to the van, there also might be an option to purchase it. All you’ll have to do is to commit to a ‘lease purchase’ style of an agreement.
Tax advantages of leasing a van
Just like as shown in buying a van, you can also claim the cost of van rental, as an expense while filing your tax returns. Finding the best choice for your business First and foremost, before committing to leasing or buying, it’s always important to bear in mind of the drawbacks incurable. For example; by buying, you will become solely responsible for:
• Upkeep of the Van – this includes of breakdowns, repairs, as well as, general wear and tear
• Legal Logistics – this takes into account of your road tax, as well as, insurance responsibilities These costs of repairs and breakdowns can prove to be crippling as a start-up, but if you are say, a little more established and can well cop up with these significant payments then buying makes more sense. Leasing isn’t all perfect either, for it certainly places an array of limitations, and you might face things like:
• Mileage restrictions – of which should they be exceeded might incur you hefty penalties
• Long-term contracts – of which might turn out to a quagmire, in that they might not fit with respect to your changing circumstances
• Overall payment - tend to outweigh the actual outright cost of buying a van ultimately
In conclusion, we get to see that buying tends to bring more freedom and autonomy while leasing tables in a little more security and diminished expenses. But with that said, neither option is by far necessarily better than the other. What best fits you, will depend upon your business. So, take a closer look at your balance sheet, deductively weigh up the pros and cons presented by each option, and finally prudently pick your option carefully, based on the deliberations achieved.
Category: The "Expert Advice"