Swiss Vans Guide to Van Finance
We hope that this guide might help you if you’re new to van financing, and we’ll do our best to explain VAT and different types of finance. It’s just our take on things, so please bear in mind that there will always be exceptions. Just like with everything in life!
And of course, we also do great cash deals, so if finance isn’t your thing, no problem. However, it’s important to remember that, while people often think that cash opens a magic door when it comes to price, that’s often not the case with vehicles. Manufacturers often give additional discounts and support on finance deals; this can run into the thousands, and as it’s “hidden” in the form of finance, it can preserve resale values. There’s a saying that “today’s discount is tomorrow’s depreciation”, so it’s worth bearing that in mind.
Cash purchases depreciate in the same year, but then again, if a company has a very large tax bill, a cash, all-in-one purchase might make sense! Sometimes though, if you’re considering a cash purchase, Hire Purchase or Lease Purchase might be a good alternative. It’s great for those who are credit blacklisted, and you get 100% depreciation for tax in the same financial year. And discounts from manufactures are generally lower on HP/Lease Purchase than on cash sales. It’s also worth looking into pre-registration, as that can also help you to achieve similar discounts.
Since a van is a commercial vehicle, you can often claim the VAT back. However, there are some exceptions. For example, if the payload on a kombi / double cab is less than 1000kg, VAT can’t be reclaimed. It’s also not possible for models like the VW Caravelle, which are considered to be more like a car.
All in all, how you to choose to finance (or not!) your vehicle is a serious decision, but we’ll do our best to help you decide by presenting the facts and information as we understand them.
Different Finance Methods
We’ll give you a quick overview now of the different finance methods available. More information can be found on their individual product pages, but this should get you started at least.
Van Hire Purchase (HP)
Hire purchase is very similar to a cash purchase, and the van is depreciated in the same year. If there is a balloon payment — a large final payment at the end of the contract term — then it’s known as lease purchase. Traditionally, the VAT must be paid upfront, but this has been relaxed in recent years. HP suits VAT-registered businesses, and ownership is automatic at the end of the deal. Agreements range between 12 and 60 months, and you can part exchange at any time with no penalties.
Lease purchase is a form of HP usually with some form of final, or balloon, payment.
Different finance companies calculate the final payments in different ways. Some use current auction values as a guide, while others work to a percentage of the original value. The balloon payment at the end of the contract makes it possible to reduce the monthly payments (which are often quite high in HP agreements). Like with HP, ownership of the vehicle is automatic once all payments have been made, and part exchange is possible at any time.
For companies with fewer than 10 vans, finance lease is easily the most popular method for van finance. It’s supported by manufacturers in that they often offer greater support and discounts than they do for cash or other types of finance. Finance lease preserves the vehicle’s resale value, which is of course good for customer and manufacturer alike. And if the van is well-looked after and has equity at the end of the contract term, you can keep that profit. Ownership is not automatic with a finance lease, but it is possible to arrange it with some paperwork and a third party. As for part exchange, you can PX or settle your outstanding balance at any time after the first 12 months of the contract.
How to Get Finance
Sole Traders & Partnerships
Finance companies can often make automated decisions here. They will have a point-scoring system, and each company has their own considerations. Most people have heard of Experian for credit checking.
In an Experian credit check, the following things are assessed:
- Whether you’ve ever had any missed credit payments even if for something small and silly.
- If you have any CCJs (County Court judgments) or an adverse credit history (e.g., if you have an outstanding gas bill from three years ago).
- If you’re on the electoral roll. If not, you can register here.
- If you’re traceable. Sometimes people have multiple addresses, particularly after a divorce. However, they can trace you from a bank statement sent to your parents’ house!
- Finance companies often require a valid driving licence registered to your current address. (On this note, please be sure to tell us the address on your licence.)
- Many banks use their own credit-checking service instead of Experian. It’s possible that even if your Experian score isn’t perfect, you might still get finance through our bank-related funders.
A Limited Company’s credit score is checked by a Delphi score; this is the Experian rating for companies. However, a very new company won’t have a credit score. The assessment for a Delphi score is more or less the same as for an Experian rating: payments history, CCJs, etc., are all examined.
Net Worth On Companies House
This is perhaps the main consideration. Your company’s net worth is public information, and if it has high net worth, obtaining credit will be easier. The opposite is also true. Generally, you can borrow up to 25% of your company’s net worth. If you’ve already used that to buy another vehicle previously though, it may be harder.
Credit checkers will also look at the company’s directors. If any of the directors have a “colourful” history, lenders will often say no. This might involve, for example, starting and then closing down lots of companies.
- An established business
A company with 10 years of accounts and a great Delphi score. In theory, there should be no trouble getting finance as long as the company hasn’t over-borrowed on other loans.
- A younger company
A company that’s three years old with three sets of accounts and a net worth of £50,000: this is a borderline Often, much will depend on the financial strength of the director(s). Lenders will frequently ask for a personal guarantee.
- A new company
A company that’s maybe 14 months old. There aren’t really any accounts to speak of, so there’s no verifiable net worth. Especially if there’s no previous sole trader company, it’s unlikely that the company will get credit without a guarantor.
You Can Always Try
The only sure-fire way to know whether or not you’re eligible for finance is to try. Give us a ring, have a chat, and we’ll do our best to advise you. We help people find the best deals for their circumstances every day, so we may well be able to help you too.
Hopefully this guide has cleared things up a little, but if not, or if you have any questions, we’re always at the other end of the phone line. Well, almost always: we do sleep sometimes!