Hire Purchase (HP)
Hire purchase is the most straightforward van finance option. You pay a deposit (typically 10–20%), then fixed monthly payments over an agreed term (usually 24–84 months). At the end of the term, once all payments are made, the van is yours. Some agreements include a small option to purchase fee - typically £1 - at the end.
With HP, you are treated as the owner of the van for tax purposes from day one, even though the finance company technically holds the title until the final payment. This means you can claim capital allowances - including the Annual Investment Allowance (AIA) - on the full purchase price in the year of purchase. There is no mileage restriction on HP agreements.
Finance Lease
Finance Lease is a rental agreement where the finance company owns the van throughout the term. You make fixed monthly payments, and at the end you can sell the van (with proceeds going to the lender, who rebates a portion to you), hand it back, or refinance. You don't own the van at the end of a Finance Lease.
Monthly Finance Lease payments are typically lower than HP because you're only paying for the depreciation of the van over the term, not the full value. For VAT-registered businesses, Finance Lease has a cashflow advantage: VAT is charged on each monthly payment and reclaimed monthly, rather than being paid in full upfront. For exclusive business use, 100% of VAT on Finance Lease payments can typically be reclaimed.
Contract Hire
Contract hire is a fixed-term rental agreement. You agree a mileage limit and a monthly rental, and at the end of the term, you hand the van back. There's no balloon payment, no residual value risk, and no ownership. Many contract hire agreements include a maintenance package covering servicing, tyres, and breakdown. Monthly contract hire payments are typically the lowest of the three main options.
The key trade-off with contract hire is that you never own the van, and mileage overruns carry significant per-mile excess charges. For businesses with predictable mileage, this is not a problem; for those with variable mileage requirements, HP or Finance Lease may be more appropriate.
Sale and Leaseback
Sale and leaseback allows a business that already owns a van to sell it to a finance company and lease it back. This releases the equity in the van as working capital while retaining use of the vehicle. It's useful for businesses that need liquidity without selling a business-critical asset.
Which Option is Right for My Business?
The Role of an Independent Broker
An independent broker like DBF has access to the whole of the van finance market - not just one bank's products. We can compare HP, Finance Lease and Contract Hire across multiple lenders, assess which product fits your tax position and cashflow, and present your application to the lender most likely to offer the best terms for your profile. There is no cost to you for this service.