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Van Finance Explained

If you’re starting a new business and need to have trusty transport to make it work, a van is a great option. Whether you’ve been eyeing up a used Ford Transit or a brand new shiny Vauxhall Vivaro, you have the option to spread the cost. Here we explain the different types of finance available for vans.

I want to buy a van, but I can’t cover the cost all at once, what are my options?
The price of buying a van can vary greatly, depending on whether you are looking for a used or new vehicle, and the make and model. If you can't afford your chosen van upfront, there are numerous different options available to you.
For a full description of all the available types of van finance, we recommend that you read this guide on Your Van Finance Options [insert hyperlink]. But to get you started, here is a quick breakdown of three of the most popular choices. We’ll then move on to explain some of the jargon that you’ll need to understand before you start the process of comparing different types of finance and providers.
Hire Purchase for vans
HP enables you to purchase a van, by making a deposit upfront and then paying off the rest of the amount over a pre-arranged amount of time, normally via monthly instalments that come with additional interest on top. HP monthly instalments are usually high, but they can be reduced by increasing the figure you pay via the deposit.
Secure your van with Personal Contract Purchase
Similar to HP, with PCP you also pay a deposit at the start and then pay back a pre-defined amount every month with interest. The distinction between these two types of finance is that with PCP, the monthly instalments are generally lower and there’s the option of paying a significant amount at the end of the term to finalise the purchase. There may also be the chance to return the van if there’s no damage and it’s still within the mileage limit set at the start. Alternatively you could also have the option to exchange the van for another van from the dealer who agreed the finance deal in the first place, this way you can use any equity you’ve built up in your current van towards your down-payment.
Personal Contract Hire is an alternative option
If you opt for PCH, you are technically hiring your van as opposed to borrowing money to buy it - you will never own the van. As with HP and PCH, a deposit and monthly payments are required. This finance option has low monthly instalments and at the end of the term, as long as it is in good condition, you simply return the van.
Van finance jargon buster
Balloon payment
If you choose Personal Contract Purchase or PCP, the balloon payment is the payment at the end of the term that secures your ownership of the vehicle.
Credit agreement
This is the name of the official document you get given and will contain all the necessary details of the agreement between yourself and the lender.
Credit score or rating
This is a rating that potential lenders use to decide if you’re eligible to be offered a loan. It’s a score or rating based on your financial situation and previous borrowing. It will take into account past or current debts and if you have loans or credit cards that are outstanding.
This is the value your van will or could lose in the future due to damage and mileage.
Mileage allowance
Before you take out any type of van finance, you will be asked how many miles you plan to drive during the term. This will influence the loan variables such as interest rate.
Excess mileage
If you go over your pre-agreed mileage allowance, at the end of the agreement you may be subjected to additional fees.
Minimum Guaranteed Future Value or MGFV
This is the minimum value that your van will be worth at the end of the agreement. It affects the variables in your agreement, such as interest rate, monthly payment amount and if opting for a PCP agreement, the balloon amount.
Total amount payable
This is the total sum you’ll have paid by the end of your term.
The agreed time in years or months by which you will have paid back the loan.
Next steps
We hope this guide has cleared a few things up, take a look at our van finance options here on AutoTrader.

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