Cost of Running a Van: How Much Does Your Van Really Cost You?
It is not really wise to opt for a cheaper van to save money because in most instances, it will cost you less to spend more up front on a van in the long run. You should know on what van to invest to save money.
It is easy enough to see which van initially costs more to buy; but it is definitely harder to know how much you will expend in insurance, petrol, depreciation, maintenance and repair over years of ownership. A study indicated that more than 80% of business owners and fleet managers have no idea on the life cost of their vehicles. More often than not, the only cost that they factor-in is the upfront cost and/or monthly payment (lease or contract hire) of their vehicle. The simple truth is: There are a lot of factors that adds up to a van’s lifetime cost.
These are some of the hidden costs that you have to face when owning and operating a van, or a fleet of them.
• Monthly Payments, Interest, and Finance Deposit – Monthly payments seem to be quite straightforward as its value is fixed. However, if the monthly payment is for contract hire, make sure that there are no hidden costs or penalties should you decide to return the van before the contract ends. Check for the computation of interest. How much is it? What is the total amount of interest you will be paying at the end of the contract? Check that the interest rate is fare. The finance deposit is a one-off payment but this should be included in the computations too.
• Depreciation – This is the largest factor to consider as generally, it accounts for around 48% of the total ownership costs over five years. On average, a vehicle depreciation rate is 65% in five years and there are vans that depreciate faster than other models due to limited appeal or oversupply or rebates on new models.
• Advanced Rental Payment – You should take care to know this amount as in some cases the +1 advance rental payment is equivalent to 9 months of advanced payment for a 36-month payment contract.
• Maintenance, Repair and Servicing – This is generally 4% of ownership cost over five years. Warranties expire which means you will have to shoulder all cost of maintenance, repair and normal servicing of the van. Take note that these items are not included in most van leasing arrangement.
• Fuel Cost -The cost of fuel really adds up more so for bigger vans. A van running on 36.9 mpg with an annual mileage of 12,000 km will have an annual fuel bill of £1700. An older vehicle is less fuel-efficient. If you have a fleet of older vans, your fuel expenditure could be exorbitant.
• Road Fund License – Owners of older vans pay more in terms of road fund license and vehicle tax. The amount may seem inconsequential but if you are paying for a fleet of vans, then the cost is significant.
• Breakdown Cover and Downtime – Most standard breakdown insurance policies include roadside recovery and rescue. This type of breakdown cover provides assistance to motorists in the event that their vehicle breaks down and cannot proceed with the journey. Check if your breakdown cover is competitively priced and if the insurance company is reliable. A research published in Fleet World indicated that the average income lost incurred by a business due to vehicle downtime is £727 per day. Now that is a lot of money and a contingency plan should be in order in the event of vehicle downtime.
Then there are those expenses that may or may not be necessary.
These expenses all add up to the cost of running a van. What could you do to save money? For one, it is more cost-efficient to acquire a vehicle through hire purchase or contract hire.
Call us up for advise regarding the best cost-efficient solution in acquiring a van.