Van financing is an important consideration if you’re looking to acquire one, whether for private or business use. The UK offers a significant number of van financing options to suit different driver circumstances. This has increasingly made it easier to acquire a new van without paying hefty initial amounts.

Today, vans are an essential part of individuals’ and corporations’ lives, accounting for a significant percentage of vehicles in the country. According to Finder, there were approximately 4.5 million registered vans in the UK by the end of 2022. In 2023, more than 300,000 vans were registered.

If you’re in the market for a new van, what financing option should you choose? Which one best suits your financial situation, and needs? In this comparative analysis, we’ll help you choose the right financing option.

What Are the Various Van Financing Options Available?

Due to the popularity of vans in the UK, there are a handful of financing options to consider. Whichever option you go with, it should be specific to your needs. The options are categorized according to the intended use of the van: business financing and personal financing options. These are Hire Purchase, Personal Contract Purchase (PCP), and Contract Hire.

Hire Purchase

Traditionally, people were used to paying a deposit, followed by monthly instalments to buy a vehicle. That’s the basis of Hire Purchase and is still common even in today’s dynamic markets. Essentially, in HP, you make an initial deposit for the van, but it’s also possible to find deals with no upfront deposit requirements.

In any case, if there’s a deposit, it’s usually 10% of the van’s cost, but you can pay a higher amount. The more you pay, the lower your monthly deposits become. You pay the balance over an agreed period, and this includes the interest on this balance. At the end of the agreement period, you become the owner of the van. So, essentially, HP is hiring the van until you make the final payment to become the owner.

Some HP contracts may also have a small “option to purchase” fee that you’ll need to pay to own the vehicle. Your van financier will let you know if this applies in your case.

Key Points to Note About HP

• Your monthly payments can be significantly higher compared to Contract Hire and Personal Contract Purchase (PCP).
• You don’t own the vehicle until you’ve completed your payments.
• The van must be put under proper insurance and maintained regularly until you complete your payments.
• If you fall behind on your monthly payments, the lender has the right to repossess the van without a court order. This may continue until you’ve cleared a third of the vehicle’s payable amount.
• You don’t have the right to sell the van until you’ve settled the HP agreement costs.

Advantages of HP

• Fixed monthly payments make it easier to budget for the cost.
• No restrictions on mileage.
• At the end of the agreement, you become the owner of the van.

Cons of HP

• You may have to put up with higher monthly instalments compared to other van financing options.
• Van ownership is transferred only after your final payment.

When should you consider HP?

HP is great if you want to own the van, but want the rights to use it without limitations while you wait to complete your payment.

Since the monthly payments are not fixed (due to interest on the balance), it may not be the best for startups and mid-sized businesses. Instead, it can best suit individuals who want a van for personal use.

Personal Contract Purchase (PCP)

A personal contract purchase (PCP) works in the same way as HP financing, but with lower monthly fees. You’re required to pay the upfront deposit, usually 10% of the van’s cost, but you may also get a 0% deal. However, the cost will be higher in the long run.

After paying the deposit, you pay equal monthly instalments over the contract period. But the amount won’t cover the total cost of the vehicle. That’s where the balloon payment at the end of the agreement comes in. This allows you to own the vehicle, but you can also opt not to pay and instead return the van to the financier.

Key Points to Note About PCP

• Under PCP, you’re simply paying for the van depreciation for the period of the agreement, along with the interests calculated on the total cost of the van.
• If you choose the PCP and opt to own the van, you should know that the final balloon settlement calculations are based on its guaranteed future value (GFV). This disregards depreciation factors such as damages. Depending on the lender, you may end up paying more than what you had in mind, despite the scratches and bumps on the vehicle.
• You should also consider your annual mileage estimates because your van comes with a mileage limit. Should you exceed this limit, you may have to pay for the excesses as laid down in your contract.
• The van must be properly insured under comprehensive insurance until you pay off its value or the contract ends.

Advantages of PCP

• The monthly payments are lower compared to HP.
• Better flexibility at the end of the agreement. You can choose to own or return the van and take another PCP agreement.
• With the upfront knowledge of your monthly fees, it becomes easier to plan your finances.
• No residual value concerns if you opt to own the van.
• Service and maintenance may be included in the contract.

Disadvantages of PCP

• Your PCP agreement has mileage restrictions.
• You may be required to pay additional charges for excessive wear and tear.
• A comprehensive insurance may be required for the agreement period.

When Should You Choose PCP

You’re better off choosing PCP if you want a van financing option with a lower financial outlay and known fixed monthly fees. Also, it’s suitable if you want to own the van at the end of the agreement.

In that case, it can best suit a business that is rapidly growing or wants to have a fleet of its own in the future.

Contract Hire

Contract Hire, also referred to as a van lease, is a long-term van rental agreement. It presents one of the most cost-effective ways to drive a brand-new van without hefty upfront costs. In this type of van financing option, you pay monthly fees to use the vehicle as if it were yours. You don’t own the van, nor do you have the ownership option. Instead, you simply return the van to the lender when the contract expires.

The length of a Contract Hire is usually between 12 and 48 months. Just like PCP and HP, you also pay an initial deposit before starting your monthly payments.

Key Points to Note About Contract Hire

• You don’t own the van at the end of the contract, nor do you have an option to purchase it.
• Your road tax is covered, and you may get other tax benefits, such as VAT deductions.
• You never have to worry about the burden of vehicle depreciation, as it is with PCP.
• Since you have to return the van, you need to factor in the damages by the end of the agreement. If the damage is beyond the normal wear and tear, the lender will require you to pay for it. Such conditions and other lender-specific terms are usually outlined in the agreement when you sign up for the van lease deal.
• The mileage restriction requires you to estimate your annual mileage in advance at the start of the contract. Any excess may attract penalties from the lender.
• You may incur penalties if you terminate the contract early.
• Some lenders may also offer an option that includes a maintenance and service package. This is referred to as a Business Contract Hire (BCH).

Advantages of Contract Hire

• The monthly payments are lower compared to PCP and HP.
• Vans used for business purposes benefit from a 100% VAT deduction.
• VAT payment is done on every lease rental instead of upfront.
• Vehicle excise duty (VED) is catered for during the entire contract period.
• Eliminates the stresses that come with vehicle ownership.
• Van fleet administration is minimal.
• No dealing with van depreciation risks.
• Save your capital for business growth.
• No stresses of disposing of the vehicle.

Disadvantages of Contract Hire

• Mileage restrictions can limit busy businesses.
• No ownership option available.
• You may be charged excess fees for damages greater than reasonable wear and tear.
• Full comprehensive insurance for the van is required.

When Should You Choose Contract Hire

A Contract Hire best suits you if you want a van financing option with a lower financial outlay at the beginning. It’s also best if you want fixed monthly payments and don’t want to deal with the stresses of full vehicle ownership.

This option is suitable for startups with tight capital. Leasing the van allows you to direct the extra capital to run your business.

Which Van Financing Option Is the Best

There’s no perfect financing option for everyone. It all depends on your unique circumstances, preferences, and budget. However, you should base your decisions on factors like ownership, monthly fees, mileage restrictions, and penalties for damages. Also, consider the flexibility offered at the end of the contract.

By closely looking at the pros and cons of each van financing option, you will be better positioned to pick the right option for you. If you still don’t have a clue about which option to go with, find a reputable lender to help you review the options.

As a commercial vehicle owner in the UK, there are certain responsibilities you must fulfill to ensure compliance with regulations, safeguard your finances, and protect your business interests. One of the most important of them is purchasing the right insurance coverage.

No matter if you’re a sole proprietor having a single van or a large business with a fleet of commercial vans, understanding the intricacies of commercial vehicle insurance is essential. In this article, we are providing a comprehensive overview of commercial vehicle insurance in the UK, legal requirements, types of coverage available, and more. So, let’s begin-

What is Commercial Vehicle Insurance?

As the name suggests, commercial vehicle insurance is exclusively designed to protect vehicles that are used for business purposes. Unlike insurance purchased for personal vehicles, commercial vehicle insurance covers risks associated with operating vehicles involved in commercial use, such as transporting goods or people, making deliveries, or offering services.

These insurance products are generally purchased for vehicles like vans, trucks, mini-busses, LGVs (Large Goods Vehicles), HGVs (Heavy Goods Vehicles), etc., that are commonly used for commercial applications.

Moreover, there are various types of commercial vehicle insurance policies based on factors such as the type of vehicle being insured, intended use, and size and scope of your business. For instance, a sole proprietor operating a single delivery van may require different coverage compared to a large logistics company managing a fleet of LGVs for long-haul transportation.

Is Commercial Vehicle Insurance Compulsory in the UK?

Under the UK’s Road Traffic Act (1988), it is mandatory for every motor vehicle on the road to have at least the minimum level of liability insurance required by law. This includes vehicles used for commercial purposes such as transportation, deliveries, and trades.

Uninsured vehicles can be fined up to £300 and the driver will also get 6 to 8 points on the license. Moreover, if the offense reaches the court, it could lead to additional penalties like driving disqualification and hefty fines. Thus, it is imperative for commercial vehicle owners in the UK to maintain proper insurance coverage at all times.

What are the Different Types of Commercial Vehicle Insurance Plans Available in the UK?

Various types of commercial vehicle insurance plans are available in the UK to meet the diverse needs of businesses. Three of the most common ones are- third-party, third-party fire and theft, and comprehensive insurance. Here’s a quick overview of these commercial vehicle insurance plans-

1.  Third-Party Insurance

Third-party insurance or liability insurance is the minimum legal requirement for all the vehicles plying on the UK roads, including commercial vehicles. It offers basic coverage for damages and injuries sustained by third parties in accidents where the insured driver is at fault. Here are some highlights of third-party insurance for commercial vehicles-

• It covers bodily injury liability, including medical expenses, rehabilitation costs, and legal fees associated with injuries sustained by third parties in accidents caused by the insured vehicle.
• The third-party insurance also covers damages to third-party property, including vehicles, buildings, and other elements, caused by the insured vehicle.
• However, it does not cover damages to the insured vehicle itself. Thus, commercial vehicle owners must consider additional coverage options for added protection.

2.  Third-Party Fire and Theft Insurance

Apart from everything that a third-party insurance policy covers, third-party fire and theft insurance also covers fire damage and theft. So, along with covering damages and injuries to third parties in accidents, this type of insurance also covers-

• Damages to the insured vehicle caused by fires, whether accidental or intentional.
• Theft of the insured vehicle, including parts and accessories, as well as damages resulting from attempted break-ins or thefts.
• While third-party fire and theft insurance does not offer the same level of protection as comprehensive insurance, it can be a cost-effective option for businesses looking for additional protection against specific risks.

3.  Comprehensive Insurance

For enhanced safety against unforeseen events, businesses consider investing in comprehensive commercial vehicle insurance plans. They offer coverage for an extensive range of risks, including-

• Accidents- Covers damages to your vehicle resulting from collisions with other vehicles, objects, or stationary items.
• Theft- The insurance policy protects against vehicle theft, including parts and accessories.
• Fire- Offers coverage for damages caused by accidental and intentional fires.
• Vandalism- Comprehensive plans also cover damages caused by malicious acts of vandalism, such as graffiti, keying, or deliberate destruction.
• Natural Disasters- The policy protects against damages resulting from natural disasters such as storms, floods, or earthquakes.
• Personal Injury- Some comprehensive policies also include coverage for medical expenses and personal injury protection for the driver and the passengers traveling in the insured vehicle.

Apart from the three commercial vehicle insurance products discussed above, there are a few other types of insurance policies that you can consider for specific business needs. For instance, you can find collision insurance that covers damages to the insured vehicle in the case of a collision. Similarly, there is cargo insurance for businesses involved in transporting goods.

What are the Factors That Impact Commercial Vehicle Insurance Premiums?

Many factors influence the premiums of commercial vehicle insurance. Here are some of the most important ones-

Vehicle Type

The biggest factor that impacts insurance premiums is the type of commercial vehicle being insured. Heavier, larger vehicles such as HGVs generally incur higher premiums due to their higher replacement costs and increased potential for causing damage in the case of an accident.

On the other hand, smaller vehicles like vans or cars used for commercial purposes generally have lower insurance premiums.

Annual Mileage

The number of miles annually driven by the vehicle directly correlates with the risk of breakdowns or accidents. Vehicles that cover longer distances have a higher probability of getting into an accident, subsequently leading to higher insurance claims and higher expenses for the insurance provider.

As a result, commercial vehicles with higher annual mileage generally have higher premiums compared to ones with lower average annual miles.

Driving History

Another aspect that insurance providers take into consideration is the driving history of the insured driver to determine the level of risk they’ll pose. Drivers with a clean record are considered low-risk and may qualify for lower premiums.

However, drivers with a history of accidents or traffic violations are considered riskier and might have to pay higher insurance premiums.

Security Measures

Implementing effective security measures can help minimize the risk of theft or damage to commercial vehicles. Installing anti-theft devices like GPS trackers, alarms, etc., makes it more difficult for thieves to steal vehicles or their contents and reduces the risk of loss for insurers.

Insurers reward such security installations on commercial vehicles by reducing insurance premiums.

Claims History

The claims history of a business also has an impact on the insurance premiums. Insurers assesses the frequency and severity of previous claims to gauge the likelihood of future claims. Businesses with a history of frequent claims, be it due to accidents, theft, or other incidents are perceived riskier and may have to pay higher insurance premiums.

But if a business has a fairly clean claims history, it might qualify for lower premiums as they pose less risk to the insurers.

How to Find the Best Commercial Vehicle Insurance in the UK?

Here are some tips to help you choose the right commercial vehicle insurance-

Check Coverage Limits

Most businesses would want to go with the cheapest insurance policy. However, it is essential to check the coverage limit of the policy and compare it with the potential risks and needs of your business.

Before choosing, ensure you assess the value of your commercial vehicle, the nature of your business, and the potential financial implications of accidents or other incidents and try to strike a balance between affordability and adequate coverage.

Check Deductibles

The deductible is a certain amount the policyholder is responsible for paying while the rest is covered by the insurer in the event of a claim. So, a lot of businesses choose higher deductibles to reduce the insurance premiums.

But while higher deductibles can offer savings through lower premiums, it also puts you at more risk as the out-of-pocket expense will be higher in the case of an accident.

Review Policy Exclusions

Commercial vehicle insurance plans often include exclusions or limitations specifying what is not covered under the policy. Ensure that you review these exclusions carefully to understand the scope of coverage and avoid any surprises in the event of a claim.

By understanding these exclusions upfront, businesses can make informed decisions about their insurance coverage needs and address any gaps through supplemental policies if necessary.

Compare Quotes

It is recommended that you gather quotes from multiple insurance providers so that you can compare the available options and choose one that is both cost-effective and offers adequate coverage as per your requirements.

Thanks to the internet, you can easily gather quotes and even purchase insurance online. There are also dedicated insurance comparison tools online that you can use to easily compare the available options.

Commercial Vehicle Insurance Simplified

Now that you know all the basic details of commercial vehicle insurance, start comparing the top choices and make the right decision. Ensure that you choose a reputable insurance provider and thoroughly go through the policy documents before making the final decision.

If you’re looking to lease or purchase a van in the UK, Swiss Vans can help. With one of the widest networks of suppliers and manufacturers across the UK, we can fulfill your van requirements at the earliest and at the best prices. Contact us today to discuss your van requirements.

With the growing concerns related to global warming, the world is steadily moving towards sustainable and eco-friendly practices. And the automobile sector is no different. One of the most significant outcomes of this paradigm shift is the introduction of electric vehicles.

For instance, businesses concerned about their carbon footprint and wanting to embrace environment-friendly alternatives are upgrading their fleet with electric vans. But while electric vans can offer a host of business benefits, the switch to this new-age mode of transport also presents several challenges.

Let us take a deeper look at the impact of electric vans on the commercial sector-

Benefits of Commercial Electric Vans

Electric Vehicle or EV adoption is steadily rising in the commercial sector due to the growing need for sustainable transportation alternatives. An increasing number of businesses across the world are recognizing the valuable benefits of EVs like electric vans in reducing their environmental impact, enhancing operational efficiency, and cost savings.

Some of the top advantages of electric vans include-

1.  Environment-Friendliness

The biggest advantage of electric vans in the commercial sector is their eco-friendly build. The traditional fuel-powered vans significantly contribute to air pollution and greenhouse emissions. But electric vans are powered by batteries and produce zero tailpipe emissions. Thus, they help mitigate the harmful impact of traditional fuel vans on climate change and air pollution.

Apart from helping the environment, a business committing itself to eco-friendly practices also improves its image and fosters positive relationships with consumers who are becoming increasingly environmentally conscious.

2.  Operational Efficiency

Another considerable benefit of electric vans is the efficiency they add to your day-to-day operations. The traditional vans feature ICE (Internal Combustion Engine), which is known to be noisy and generate substantial vibrations. But electric vans are known to be smooth and quiet. As a result, they help reduce noise pollution and create a more a more positive work environment for your crew.

Moreover, electric vans offer instant torque and quick acceleration to deliver improved performance. These benefits translate into improved operational efficiency, especially for businesses involved in delivery and transportation services.

3.  Cost Savings

Electric vans are generally more expensive than traditional fuel-powered vans. But while the upfront investment is higher, they do offer significant savings in the long run. To begin with, electric vans do not need fuel. And with the fuel costs consistently rising, this aspect alone can help a business save a considerable amount of money.

Also, EVs have fewer moving parts, resulting in lower maintenance costs. Moreover, governments in many countries offer incentives, subsidies, and tax credits to encourage EV adoption. In the UK, you can be eligible for a grant of up to £2,500 on the purchase of a smaller electric van and up to £5,000 on larger electric vans.

4.  Regulatory Compliance

The regulatory landscape with regard to emissions is undergoing significant changes globally. The governments are making the emission norms more stringent to address air quality concerns and climate change. For instance, diesel and petrol vans in the UK should comply with Euro 6 and Euro 4 emission rating guidelines respectively.

As electric vans do not produce any tailpipe emissions, they can help you ensure that your fleet always remains compliant with the stringent regulations. This can help businesses protect themselves from potential fines, future-proof their fleet, and exhibit a proactive approach to corporate responsibility.

5.  Team Satisfaction

Apart from the environmental and operational advantages, the transition to electric vans also influences your workforce in terms of satisfaction and talent retention. The quiet and smooth functioning of EVs contributes to a more pleasant and comfortable driving experience. This directly influences the satisfaction levels of your drivers and crew.

Satisfied employees are more likely to remain with your company, reducing turnover rates and associated recruiting costs. Moreover, your latest fleet of electric vans can also attract top talent by serving as a powerful tool for recruitment in a highly competitive job market.

What are the Common Challenges of Adopting Commercial Electric Vans?

As mentioned above, the switch to electric vehicles comes with its share of challenges. To encourage widespread acceptance, it is necessary to address these challenges. Some of the most common ones are as follows-

1.  Driving Range

A common concern for businesses wanting to upgrade to electric vans is the limited driving range. If the trip is not planned thoroughly, the battery pack of the electric vehicle may run out of charge before reaching the destination.

While battery technologies have advanced significantly in the last few years and EVs now come with better range, the challenge requires the development of a robust charging infrastructure. The government and private entities should collaborate to build a charging network across the UK so that businesses can confidently switch to electric vans.

2.  Charging Time

Another significant concern for businesses is the charging time of electric vans. Unlike the convenient and quick refueling process of traditional vans, the charging time required by EVs can pose significant challenges, especially for businesses where quick turnaround times and efficiency are critical.

However, the advancements in fast-charging technology have steadily reduced the charging times. Another innovative technology that is gaining popularity is battery swapping. Rather than waiting for the battery to charge, the depleted battery can be quickly replaced with a fully charged one.

3.  Initial Investment

The upfront cost of electric vans is often higher than traditional fuel-powered vans. This is a significant barrier for businesses like small and medium-sized enterprises (SMEs) with limited resources.

The government has a critical role to play in this regard as it can offer tax breaks, incentives, and grants to encourage EV adoption among businesses. In the UK, the government offers tax incentives on the purchase of small and large electric vans. Even financial institutions have introduced favorable financing options to make the transition to EVs less expensive.

4.  Maintenance Expertise

Compared to traditional vans, EVs have a simplified mechanical structure and fewer moving parts. However, specialized knowledge is required to address the issues that might arise. It can be difficult for businesses to find skilled technicians with expertise in EVs when something goes wrong.

To mitigate this issue, businesses should invest in training to equip employees with the essential skills to diagnose and repair electric vans. Businesses must also collaborate with service centers specializing in EV maintenance to ensure their vans deliver optimal performance.

5.  Resale Value Uncertainty

With battery technologies changing at a rapid pace, another concern for businesses is regarding the resale value of electric vans. If developments continue at the current pace, older models could easily become outdated or less competitive in the market within a few years.

Thus, businesses should adopt strategies that account for the evolving nature of technologies that power EVs. Moreover, as this problem becomes more common in the future, manufacturers will mostly start offering flexible upgrade options, allowing businesses to replace their existing EVs with one of the latest models at discounted prices.

Why Businesses Should Consider Switching to Electric Vans?

Now that you know some of the most important benefits and challenges of electric vans for businesses, let us also take a quick look at some of the top reasons for switching to EVs-

1.  Build a More Sustainable Business

Adopting electric vans aligns with the growing emphasis on sustainable business practices. An increasing number of commercial entities are recognizing the need to minimize their environmental impact throughout their operations.

Electric vans significantly contribute to this sustainability initiative by offering a cleaner and greener mode of transportation. In turn, this will enhance the overall sustainability profile of your business and make it more appealing to consumers and investors who are environmentally conscious.

2.  Smart Technology Integration

EVs are a lot more than just vehicles. They are integrated with a host of smart technologies which make them more efficient, safer, and cost-effective. For instance, the latest models come with advanced connectivity options and various features like smart co-pilot, facial recognition, and a lot more to pave the path for newer possibilities.

With the help of these advanced features, businesses can optimize route planning, monitor the location and performance of their vans in real time, save fuel, enhance security, and improve overall fleet management. Apart from operational efficiency, these technologies are also setting the stage for a more intelligent and interconnected transportation ecosystem.

3.  Overall Economic Growth

The widespread adoption of electric vans in the commercial sector also has a broader economic impact. As the demand for EVs and associated technologies increases, there is also a ripple effect on several other industries. For instance, the manufacturing sector will witness a surge in the production of EV components and infrastructure.

Moreover, the rising need for skilled technicians who excel in EV maintenance will also create job opportunities. Thus, the transformative potential of electric vehicles extends beyond individual businesses and can significantly contribute to economic growth and job creation.

 The EV Revolution

While EVs are making their presence felt in the passenger vehicle segment in the UK and across the world, the pace is not the same in the commercial sector. As discussed above, electric vans can surely benefit businesses in several ways but various challenges must be addressed in order to encourage the adoption.

The manufacturers and the governments are steadily working towards these obstacles so that businesses and individuals can confidently upgrade to electric vehicles.

If you’re looking to purchase or lease a commercial van in the UK, Swiss Vans can be the right companion. With over 30 years of industry experience and a vast industry network, we can help you procure the preferred van for your business. Contact us today to know more about our services.