Calculate van finance costs including HP, lease, and business contract hire. Find monthly payments, total cost, and VAT reclaim potential for sole traders and limited companies.
Yes — VAT-registered businesses can reclaim 100% of the VAT on a commercial van used exclusively for business purposes. Unlike cars (where only 50% VAT is reclaimable on vehicles not exclusively for business), vans and commercial vehicles used solely for business can have the full 20% VAT reclaimed, significantly reducing the effective purchase cost.
Hire Purchase (HP): you own the van at the end of the agreement after paying all instalments. Business Contract Hire (BCH): you lease the van and return it at the end — you never own it, but monthly payments are typically lower. HP suits those who want to own the asset and claim capital allowances; BCH suits those who want to keep payments low and upgrade vehicles regularly.
Yes — vans (commercial vehicles) qualify for the Annual Investment Allowance (AIA), which allows a 100% first-year deduction against profits. For 2024/25, the AIA is £1 million. This means buying a van outright (or on HP) allows you to deduct the full purchase price from taxable profits in year one, providing significant tax savings. Cars do not qualify for AIA — they use writing-down allowances instead.
Van finance rates vary by lender and creditworthiness. In 2026, typical representative APR rates for business van finance range from around 5-10% for strong business credit profiles. Main dealers often offer introductory rates around 5.9-7.9%. Always compare the total cost of credit (not just APR) and check whether the rate is fixed for the term.
For most small businesses, buying via HP (or outright) is more cost-effective long-term as you build equity in the asset and can claim AIA. Leasing (BCH) suits businesses that prefer predictable fixed costs, don't want ownership/disposal risk, and need to upgrade regularly. If cash flow is tight, BCH often has lower monthly payments than HP for the same van.