Financing a used van

For a lot of sole traders, the van comes before the work does. Paying for one in a single go is not always possible. Many people spread the cost instead. This page explains the main ways that works in the UK, and the tax and legal points that come with them.

Hire purchase or leasing

With hire purchase or a lease, a finance company buys the van and you pay for it in regular instalments. Your business is usually responsible for looking after it. You pay interest on the instalments, so the van costs more overall than paying outright.

With hire purchase, your business owns the van once every payment has been made. With a lease, you may never own it, although some leases let you buy it at the end. Contract hire is a kind of lease where the leasing company takes on some of the servicing and repairs.

Rules that cover sole traders

Consumer credit rules apply when the borrower is an individual, a sole trader or a partnership of three or fewer partners. Credit between businesses usually falls outside those rules, especially for amounts over £25,000.

A regulated hire purchase agreement can include a right called voluntary termination. In one case the Financial Ombudsman Service describes, it let a driver hand the vehicle back early and pay half of the agreement, plus any arrears and damage charges. Your own agreement will say whether it carries that right.

Van or car, for tax

HMRC's VAT rules treat cars and vans differently. A van with side windows behind the driver's seat, or with rear seats fitted, can count as a car for VAT. As a general rule, a business cannot reclaim the VAT on buying a car. A van bought from a private seller usually has no VAT charged on it at all.

For income tax, vans qualify for the annual investment allowance and cars do not. On hire purchase, you can claim for all the payments once you start using the van, apart from the interest. A leased van works differently, because capital allowances usually only apply to things you own or have on hire purchase. If you also use the van privately, a sole trader's claim is reduced by that share.

Checks before you sign

GOV.UK lets anyone see a vehicle's MOT history. It shows the mileage at each test, what failed and when the next test is due. A standard car licence, for a test passed since 1997, covers petrol and diesel vehicles up to 3,500 kg maximum authorised mass. The Financial Conduct Authority (FCA) runs a Firm Checker. It shows whether a firm is authorised and has permission to offer a product. It also gives the contact details to use, which helps you spot a copycat firm.

Older finance and complaints

The FCA has a compensation scheme for people who used finance on a car, motorbike or van between 6 April 2007 and 1 November 2024. Agreements for business purposes over £25,000 are outside it. Parts of the scheme have been challenged in court, with a hearing due in February 2027. Until the case ends, lenders do not need to pay compensation under it. The FCA's advice, if you have concerns, is to complain to your lender.