The average value of a used van is now sitting at just above the £3000 mark, after falling an additional 3% last month, according to latest auction results.

At Boxby, we are always watching the Transport industry to update you on news that is relevant to all couriers and courier companies.  Falls in the values of vans have a number of consequences for couriers and courier companies;

You May be in Negative Equity

We all associate negative equity with property, however the same principles apply to vehicles and other assets purcahsed with finance.  Low used van values mean that effectively van owners can end up in "negative equity" if they have a hire purchase agreement, or a finance lease, that is probably longer than 3 years.  It means that you will have a shortfall between the value of the van, and the outstanding finance on it.  This is virtually guaranteed on any vehicle finance arrangement which has been made over 4 or more years.  Vehicles loose their value up front, they loose more in the first year.  Compared against your finance agreement where in the first few months you actually pay very little off your capital loan, and most of the payment goes towards interest. 

Cheap Used Vans for Start Up Couriers 

If you are considering taking on extra vehicles, then its a good opportunity to buy a used vehicle rather than a new one. If you are starting up as a courier business, then it would probably be safest to buy a good secondhand van.

Shorter Contract Hire Periods for Couriers

If you are considering taking on additional new vans, then you should really look to keeping the finance period as short as possible, to protect yourself from the shortfall situation.  If you don't have the cashflow to repay van finance over a 48month period, then maybe you should think about alternative financing arrangements, contract hires can be taken out for 12, 18 or 24 month periods (as well as the longer 36 or 48 months), at least this way you only have your monthly rentals to budget for, and no worry about shortfalls and residual values.

If you are a new start up in the courier industry then please consider that it can be much tougher than you anticipate.  Contract hire rentals must be paid until the end of the contract, regardless of whether you are trading or not.  We would therefore suggest that new courier company start ups go for a shorter contract hire period initally, it may cost a little extra in monthly rentals, but at least you have the comfort of knowing that you are only committed to those rentals for a short period, rather than 4 or 5 years.

Extending Your Contract Hire Period

If you have a contract hire due to end in the near future you may wish to extend the hire period.  Most contract hire companies companies will allow this, and a short extension may be easier on the cashflow than financing new or replacement vehicles.  This is apparently a large trend in fleet management at the moment, it's quick and simple and can usally be sorted with a telephone call and an email/letter.

Examine the Valuation price at the end of your Contract Hire.

Finally, if you have a Contract Hire contract due to end, the end settlement figure, if you are looking to purchase, is based on market values.  We would recommend that you make sure that the value given really is current market values, and not either a historic number from the period when you took the contract out, or a mathematical calculation.  Use Glasses guide for van valuations, and if the contracts "market valuation" looks over valued then question it.

Image; New ford Transit, from Ford UK