Financing All-Electric Commercial Vans

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Electric vans – which first hit the market at the beginning of the decade with the Renault Kangoo and Nissan e-NV200 – have grown increasingly popular over the past two years. After updates to both models in 2017 and 2018 respectively, the official zero-emission range is over 170 miles. Compared to electric cars, which have made a sizeable dent in the petrol and diesel markets, the range for electric vans is far less – but considering the weight and aerodynamics of a commercial van, the current range is impressive – and adequate. 

Renault calculated that 85% of business van journeys could now be completed with the all-electric Kangoo ZE with its 170 miles of range.

However, it’s when you need to recharge that obstacles occur. Fast-chargers, which are commonly found at motorway services, can provide 80% charge in 40 minutes, whilst residential stations could require all night. However, for the majority of users, the positive benefits of purchasing an electric van far outweigh the cons. Electric vans produce no CO2 or NOx emissions, they’re vastly cheaper to run than diesel alternatives, the up to £8,000 government grant on new vans can make a sizeable difference, not to mention greater performance and brand image.

If deciding whether to go electric is no longer a question, and you’re committed to making a positive environmental impact, the next stage will be how to purchase or finance the van.

Renault All-Electric Van
Renault All-Electric Van

The most popular options for businesses are Business Contract Hire and Business Finance Lease. Both have different benefits depending on the size of the company, and what they plan to do with the van at the end of the agreement. 

Contract Hire is the most popular method for fixed-cost motoring. You would simply choose the length of contract, usually 24 to 60 months, pay a deposit, usually equivalent to 3 months rentals, and at the end of the agreement you hand the car back to the leasing company. Because the leasing company own the vehicle throughout the term, the van is kept ‘off-Balance Sheet’ meaning the remaining payments aren’t logged as a liability to your business. In addition, 100% of the VAT on the rental and maintenance fees are reclaimable, and the monthly payments are Corporation Tax deductible.

Despite the ‘hassle-free’ motoring, you will have to estimate how long you are going to use the van as when the term is over you have to hand the keys back – there is no option to extend or purchase. All Contract Hire agreements also include mileage limits and going over these can be costly. But with preparation Contract Hire can be the best finance option with the least administration. 

Finance Lease, on the other hand, has a ‘balloon payment’ at the end of the agreement – as the company is liable for disposing, or keeping, the vehicle. VAT is only payable on the rental payments, not the cost of the asset, so this can ease cash flow and be an ideal option for businesses who can’t reclaim VAT. You can also settle the agreement early, and there isn’t mileage or wear and tear limits. Although, you are at risk to fluctuations in the used price of the van – which could mean it’s worth less than the balloon payment at the end and you’re liable for the shortfall. The monthly rentals will also appear as a liability on your balance sheet.

LEVC All-Electric Van
LEVC All-Electric Van

In summary, electric vans are increasingly popular and are, for the majority of uses, capable of replacing an internal combustion engine (ICE) van. However, as the battery technology evolves and the nascent segment finds its audience, residual values can vary more so than traditional fuel types. Therefore Contract Hire agreements, where a lease company owns the vehicle and you’re able to hand it back at the end, could be an easier method to get behind the wheel of a quieter, greener van.

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Ashvin Suri

Ashvin has been involved with the renewables, energy efficiency and infrastructure sectors since 2006. He is passionate about the transition to a low-carbon economy and electric transportation. Ashvin commenced his career in 1994, working with US investment banks in New York. Post his MBA from the London Business School (1996-1998), he continued to work in investment banking at Flemings (London) and JPMorgan (London). His roles included corporate finance advisory, M&A and capital raising. He has been involved across diverse industry sectors, to include engineering, aerospace, oil & gas, airports and automotive across Asia and Europe. In 2010, he co-founded a solar development platform, for large scale ground and roof solar projects to include the UK, Italy, Germany and France. He has also advised on various renewable energy (wind and solar) utility scale projects working with global institutional investors and independent power producers (IPP’s) in the renewable energy sector. He has also advised in key international markets like India, to include advising the TVS Group, a multi-billion dollar industrial and automotive group in India. Ashvin has also advised Indian Energy, an IPP backed by Guggenheim (a US$ 165 billion fund). He has also advised AMIH, a US$ 2 billion, Singapore based group. Ashvin has also worked in the real estate and infrastructure sector, to including working with the Matrix Group (a US$ 4 billion property group in the UK) to launch one of the first few institutional real estate funds for the Indian real estate market. The fund was successfully launched with significant institutional support from the UK/ European markets. He has also advised on water infrastructure, to include advising a Swedish clean technology company in the water sector. He is also a member of the Forbury Investment Network advisory committee. He has also been involved with a number of early stage ventures.

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