0% APR van finance

0% APR van deals can be great value, with no interest charged. Other offers with deposit contribution discounts, could be even better though

Matt Rigby
Jul 29, 2021

A 0% APR van finance offer can appear to be great value on paper, as the credit being extended to you is effectively interest-free. As a result, you’ll pay no more overall to finance the van and then take ownership at the end, than if you paid cash for the van at the start.

The thing to bear in mind is that a tempting-sounding 0% APR deal for a new van may not include manufacturer or dealer deposit contribution discounts or other financial incentives that might be available with other deals from the same manufacturer or dealer. The result is that the overall cost - and monthly payments - can sometimes be less with deals that charge interest, if the other discounts outweigh the cost of the interest charged.

All other things being equal, where you have two finance deals on a van - one with 0% APR and one that charges interest - the 0% APR deal will offer better value. But this may not be the case if there are extra discounts available on the deal that involves interest payments. In short, it’s worth doing the maths with any finance deal. Get like-for-like quotes - the same type of finance, deposit amount, contract length and mileage allowance - and you'll see which one is cheaper.

If you’re looking at a brand new van, it’s also worth thinking about nearly new or used models if you're after maximum bang for your buck, as these can offer significantly better value on like-for-like finance terms. In other words, with the same contract details monthly payments on a used or nearly new van are typically much lower than for a brand new equivalent.

The reason for this is that brand new vans depreciate rapidly in value, so even a van that’s just a few months old can be much cheaper to buy outright than an equivalent brand new van, meaning that monthly payments could be cheaper on the used vehicle - even if you’re paying interest - as you're financing a much lower amount in the first place. As always, getting like-for-like quotes will help you to see which deal is the cheapest, when comparing vehicles.

Types of 0% APR van finance

The most popular types of vehicle finance are Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements - and you’re likely to find 0% APR deals on new vans with both types of finance.

PCP deals are flexible and offer relatively low monthly payments for the value of the van, due to the fact that the deposit and monthly payments only cover the amount of value the van is expected to lose over the course of your contract agreement.

At the end of this period, you can choose to hand the van back to the finance provider with nothing more to pay - provided you've stuck to the pre-agreed mileage allowance and caused no damage beyond fair wear and tear - or buy the van outright by making the large optional final payment - also known as the balloon payment. The van will then be yours. If you don’t have the cash available at this point, you can also choose to refinance in order to pay the balloon payment off.

If the van is worth more than the optional final payment at the end of the contract, any value above the remaining finance balance can be put towards the deposit for a replacement van. This is known as equity.

Read here about what happens at the end of a PCP deal.

Hire Purchase deals work a little differently to PCP, as your deposit and monthly payments cover the whole cost of the van. This means that the monthly payments are higher, but you automatically own the van once you've made the last monthly payment.

With finance offers that charge interest, you'll end up paying less interest with Hire Purchase, as you're paying off the finance balance quicker than with an equivalent PCP deal with the same contract length and deposit amount. However, as no interest is charged with 0% APR deals, 0% PCP finance offers can be particularly appealing, offering low monthly payments, without any additional interest to pay compared with Hire Purchase equivalents.

Just remember that if you want to buy the van at the end of the contract with PCP finance, you'll need to make a large optional final payment to take ownership, so you'll need to think about how you'll cover this. 

0% APR finance for vans: how it works

APR - short for annual percentage rate - is how finance companies present how much finance costs. APR figures take into account any fees for taking out the finance as well as the interest charged overall for the finance.

So, if a lender or broker is offering 0% APR credit, then it is charging no interest or fees for its product - and therefore the overall cost for buying on finance would be no more than you would pay if you bought the van upfront as a cash purchase.

It’s important to note, though, that many 0% APR deals do not include sales incentives such as deposit contribution discounts that might be available through other finance deals. As a result, you’ll most likely have to pay the full list price of the van.

You might be able to negotiate some money off a sticker price if you’re paying cash, but normally bigger discounts are available with finance deals that charge interest - so do your sums carefully to make sure that the 0% APR offer is actually the best value option where there are multiple finance options available.

0% APR finance for used vans

Used vans are less likely to be available with 0% APR finance than new vans. And even if you do find a 0% deal on a used commercial vehicle, it’s worth checking that the advertised price isn’t higher than a comparable model available with a different deal.

In fact, when comparing new vans and used vans you can often find that you’ll end up with lower monthly payments on a used van deal with a reasonably low APR rate than you would on a new van with 0% APR.

Whenever you're looking to assess quotes, the best way to compare different deals is to get like-for-like quotes. This will allow you to directly compare figures and make an informed choice about which one will actually cost you the least.

How you can qualify for 0% APR van finance

Generally, a key part of securing a 0% APR deal is making a large deposit. This reduces the risk for the lender of losing money if you fail to keep up with payments, as it has received a substantial chunk upfront.

Meanwhile, if you have a poor credit rating and you’re looking for finance on a van, you generally won’t be offered the lowest possible rate, so a 0% APR deal is unlikely to be available to you in these instances.

*Representative PCP finance - Ford Fiesta:

48 monthly payments of £192
Deposit: £0
Mileage limit: 8,000 per year
Optional final payment to buy car: £2,923
Total amount payable to buy car: £11,926
Total cost of credit: £2,426
Amount borrowed: £9,500
APR: 9.9%

BuyaCar is a credit broker, not a lender. Our rates start from 6.9% APR. The rate you are offered will depend on your individual circumstances.

 

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