July 02, 2021 0 Comments

Van Leasing Explained – Cool Running Rental

Looking to lease a refrigerated van? Not sure how leasing works? We’re here to answer those areas of concern so you can better understand leasing refrigerated vans.

Leasing a refrigerated van in short is a method of rental situated over a long-term period, paying monthly at a fixed cost according to the number of months you will keep the vehicle for and the amount of mileage you will use over this period.

Van leasing is a form of credit. This would require you to pass a credit check to secure the agreement between yourself and the finance issuer.

If your credit score is high, you are more likely to receive a better interest rate. This, in turn, lowers the price of your monthly repayments.

Credit checks held out through van leasing services will not assess your expenditures, which means you will not need to make sure the costs are within your budget.

If you want to get out of a PCH deal earlier than your contract date, the company may disallow early termination, or there will be additional costs before you leave that you may not have budgeted for.

This could be an issue for you if your reasons for early termination are due to lack of funds.


How do I finance a refrigerated van with Personal Contract Hire (PCH)? 

If you are wanting to hire a refrigerated van on a long-term basis and you do not wish to keep the van at the end of the agreement, your cheapest option is likely to be using PCH for several reasons:

  1. The lease agreement lasts between 2 to 5 years. 
  2. All applications will need to undergo a compulsory credit check. 
  3. You must pay around three months’ lease upfront. 
  4. The van is owned by the finance company during the full agreement, you must hand it back at the end of your rental term. 
  5. Monthly payments are normally higher than for equivalent vans leased through PCP, but over the entire contract you will typically pay less on a PCH. 
  6. Sometimes you can opt for a maintenance package that covers things like annual vehicle tax (road tax) or servicing. 
  7. There are strict terms and conditions, like limits to the number of miles you can do.


How much do I pay a month for a PCH?

Monthly payments are normally higher than if you had leased the van through PCP. This is because you are borrowing the full amount of the vehicle and with PCP, you are borrowing part of the value.

However, the total amount you pay over the contract is often less than with a PCP. But every deal is different so make sure you shop around and compare the total cost including running costs. 

PCP is similar in many ways, but lets you purchase the van at the end of the agreement. 

Restrictions when you lease a refrigerated van

As with all rental agreements, there are some restrictions you need to bear in mind: 

  1. You will not be allowed to modify your vehicle in any way – for example, adding a tow bar – without permission. However, you can ask the leasing company to make necessary modifications before you take it. 
  2. If you exceed the agreed mileage, you will have to pay a penalty for the extra miles at the end of the agreement. Typically, this is 10p per extra mile and soon adds up, so make sure you estimate your mileage accurately – in 2015, the average household vehicle travelled 7,900 miles per year. Understand the cost of going over the mileage. It may be cheaper to opt for a higher mileage agreement than pay penalties. 
  3. You must return the van ‘in good repair and condition’ (considering ‘fair wear and tear’). So, if, for example, a wing mirror gets broken, you might be charged to cover the cost of putting this damage right. 
  4. If you plan on taking the van abroad, you might need to obtain written permission from your finance company each time you do so and there might also be a charge. 


The big difference between PCP and PCH: buying and owning a refrigerated van 

Four out of five people with PCP plans do not opt to buy the vehicle at the end of their contract (source: the finance and leasing association). Is it likely you will be one of them?

If so, leasing a van through personal contract hire (PCH) might work out cheaper for you. Be careful though. If you cannot afford the PCH monthly payments and must cancel the agreement, you may have to pay off the leasing costs in full, which would end up costing you more.

While PCP can be used as a way of leasing a van, it also gives you the opportunity to buy the van and become its legal owner at the end of the leasing contract. PCH does not.

To do this, you must pay a ‘balloon payment’ – also known as the Guaranteed Minimum Future Value (GMFV) – at the end of the contract. This is in addition to your deposit and monthly payments and will be a few hundred or thousand pounds.

With PCP the total amount you pay in monthly instalments is based on an estimate of how much the van will lose in value through depreciation between the start and end of the contract.

If at the end of the contract you do not want to buy the van, you simply hand it back. If the van is in good condition and has not exceeded the agreed mileage, you will not have to pay any more money. 

With both PCH and PCP the lender can repossess the van without a court order. But with PCP, once you have paid at least a third of the total amount payable, they cannot repossess it without a court order. 

Your rights if you want to cancel a PCH plan 

Ending a PCH early means that you might have to pay off the lease costs in full, so think very carefully before cancelling the agreement and find out exactly what these total costs would be. 


What to do if you are getting behind on van finance payments 

Returning the van

If you have paid (or can pay) half the cost of the van, you have the right to return it. For a PCH, there can be further changes, so check your agreement. 

Talk to us!

With the frequent shift in leasing deals and interest rates, you can get in touch with us where we will help find you the best leasing option suited to your chosen term and monthly repayment.

If you get behind with your monthly leasing payments, you may run the risk of losing your vehicle. So, make sure you can meet your planned monthly payments. 

Do I need to complete an MOT for my leased van?

An MOT is only required after a three-year period. Therefore, unless your lease term exceeds a three-year period, you will not need to obtain an MOT certificate. 

Is van insurance included in the leasing price?

Unfortunately, insurance is not included. This is as every customer is different, i.e., age, area etc. Meaning it is impossible to cost insurance with the lease price. All lease vehicles must be insured comprehensively. 

Can you explain 2+23 for a 2-year contract of 3 + 35 on a 3-year van leasing agreement?

Van leasing deals are usually calculated over a 2 or 3 year term. Deals are advertised as 3+23 or 3+35 contracts. The ‘3’ stands for 3 payments in advance, then the +23 or +35 equates to the quantity of payments you will pay throughout the contract term. You will also see deals advertised for comparison on different payment profiles, for example 6+23 and 6+35; this allows our customers to see other options available. Some customers prefer to pay a higher payment at the front of the lease, which in turn reduces the monthly rental amount for the balance of the contract. 



Who owns the vehicle?

On both ‘business contract hire’ and ‘personal contract hire’ the finance company are the legal owner of the vehicle on the V5 document. The finance company the lease is taken out with, will record the customer/business as the keeper of the vehicle on their internal records for the lease term. If you require further clarity on this question, please call one of our team and they will be happy to explain in more detail. 

What happens if I exceed the annual mileage on the lease contract?

Every lease vehicle contract gives an ‘excess mileage’ price. Therefore should you exceed your agreed total mileage, any additional mileage would be charged at this rate. EG: Excess pence per mileage rate = 5p. 1000 Miles over the total contract mileage would be charged at £50.00 + vat = £60.00. The finance company will invoice you after your lease van is returned. 

Are all lease vehicles brand new with no previous owners?

99% of vehicle leasing offers are calculated on brand new vehicles. Some finance companies however, will process leasing contracts on vans up to 12 months old.

Is Road Tax included in the leasing price?

Road fund license is included for the full contract duration on 99% of deals. Please check the deal details associated with your deal of interest to ensure this is the case. 

Are leased vehicles covered by any form of warranty?

All brand-new lease vehicles come with the standard manufacturer warranty supplied at main dealer level. 

What is maintenance?

You can opt to include what is called a ‘maintenance package’ in with the price of your lease. This generally covers you for your annual service and any wear and tear items which need replacing (excluding damage). Please check your quotation paperwork and ask your main dealer if you are unsure. 

Is delivery included in the leasing price?

The majority of leasing deals include delivery to a UK mainland address of your choice. You can verify this with your main dealer contact or check the deal details section on your vehicle of choice

Should I lease or buy?

It is important you weigh out the pros and cons to leasing vs buying – purchasing a refrigerated van means you fully own the vehicle and can add modifications without having to ask the registered owner. This being said, your monthly repayments could be higher, this leading you financially lighter at the end of every month. Leasing means you don’t own the van. This is perfect however, if you have no intention of owning the vehicle at the end. 

Still have questions to ask?

If you are looking for further information on leasing, or an example of our official terms and conditions, please don’t hesitate to get in touch with us. We are here and happy to provide you with the best experience in purchasing/leasing refrigerated vans we can offer!