Who knew your van could be an investment?
There is one thing everybody knows about buying a van, and it is that you are going to lose money on it.
It is the first thing anyone says. Drives off the forecourt, loses a grand before you reach the roundabout, worth half of nothing in five years. It is practically a British folk belief, somewhere between warming the teapot and never trusting a man in brown shoes.
And for a long time it has been broadly true. Except that for the last couple of months it has stopped being true, and almost nobody has noticed.
What actually happened
The average light commercial vehicle sold through BCA in September went for £8,820. That is up £462 on August, a rise of 5.5% in a single month, and the highest monthly average in thirty months. Go back two months and values are up £886, which is 11.2%. Year on year they are up 4.3%.
Those are not small numbers for a used asset that everyone assumes only travels in one direction.
The figure I find more interesting, though, is buried further down. Vehicles sold at 104.5% of guide price. Third monthly improvement in a row, highest since February.
Selling above guide price means the trade is paying more than the valuation books say the vehicles are worth. That is not buyers being sentimental. That is what a stock shortage looks like from the inside. Stuart Pearson, BCA's chief operating officer, put it simply enough: values kicked on again in September to record the highest average value in thirty months, and retail demand for used vans remains steady.
The number almost nobody checks
If you have a van on finance, here is something worth two minutes of your time.
Your settlement figure, the amount you would need to clear the agreement today, falls on a fixed schedule. It was written into the deal the day you signed it. It does not care what the market is doing. It goes down a bit every month, like clockwork, whatever happens to used values.
Your van's value does the opposite. It moves with the market, and the market has just moved up 11% in two months.
The gap between those two numbers is your equity. And because one of them is fixed, a fairly modest move in the van produces a much bigger move in the gap.
Take a van worth £10,800 in July with £9,000 still owing on it. That is £1,800 of equity. Now apply the 11.2%. The van is worth £12,010, you still owe £9,000, and the equity is £3,010.
The van went up 11%. Your equity went up 67%.
That is not clever financial engineering. It is just what happens when one side of a subtraction moves and the other one stays put. But it means a lot of business owners are sitting on rather more than they think.
And this is where it gets genuinely useful
So far this is a nice piece of trivia. Here is the part that actually does something.
You can borrow against a van you own. It is called asset refinance, and it raises money against the vehicle while you carry on using it exactly as you do now. The van stays on your drive and keeps doing the work. The capital comes out of it.
Lenders can typically advance up to around 80% of a vehicle's value, depending on the vehicle and your business.
Now look at that sentence again, because the operative word is value.
A lender deciding what to advance works from book values. Book values have just gone up 11% in two months. Which means the same van, sitting in the same yard, doing the same job it was doing in July, will now support a meaningfully larger advance than it would have done then. You did nothing. The market moved.
This works on vehicles you own outright, and it can work on vehicles that still have finance on them, which is where the settlement figure comes back in. If the van is worth more than you owe, that difference is the bit a lender can work with.
If your business owns more than one, the effect multiplies. Three or four vans that each support a larger advance than they did in the summer adds up to a different number entirely.
Why this is the cheapest money your business can borrow
This is the part most business owners have never had explained to them, and it matters more than the percentage movement in van values.
When a lender advances money against an asset, they hold security over something real. If it goes wrong, they have a van they can take back and sell. That security is worth a great deal to them, and it is reflected directly in what they charge.
Compare that with the alternatives. An unsecured business loan has nothing behind it but your covenant and a personal guarantee, so it is priced for that risk. Invoice finance, merchant cash advances and the various short term products that get marketed at businesses with a cash flow gap are more expensive again, sometimes dramatically so.
So if your business is short of working capital and you own vehicles, you are very probably looking at the cheapest borrowing available to you without having realised it.
One practical point when you go and compare options. Ask every lender for the total amount repayable across the full term, rather than fixing on whatever headline figure they lead with. That total is the number that tells you what the money actually costs you, it makes two very different-looking offers directly comparable, and any lender worth dealing with will hand it over without fuss.
The part that is less fun
Worth saying plainly, because a piece that only sold you the upside would not be worth reading.
Refinancing a van you own outright converts an asset you own into secured debt. You get capital now, and in exchange you take on a monthly payment and the lender takes security over the vehicle. If the business cannot keep up with the payments, they can take the van, and that van is usually how the business earns.
It makes sense when the money is going to do something productive. Taking on a bigger contract, buying equipment that pays for itself, bridging a genuine gap between doing work and being paid for it, or replacing more expensive borrowing you already have. It makes considerably less sense as a way of generating cash for its own sake because values happen to be up.
And values being up is exactly why the timing is good, not a reason in itself.
This is the opposite of what we told you in September
Worth being straight about, since we published the other side of this six weeks ago.
In the piece about tool theft we pointed out that if a van is stolen or written off, your insurer settles on market value while your lender wants the settlement figure, and that those two numbers do not always match. The warning was that market value can come in lower, leaving you to find the difference.
Right now, for a lot of people, it is the other way round.
Both are true at different points in the cycle, which is rather the point. Neither number is permanently in your favour, and the only way to know which side of it you are on today is to go and look.
If you are buying rather than owning, this is not good news
Even handedness requires this bit.
Everything above is cheerful if you already have vans. If you are about to buy a used one, it means you are paying more than you would have in the summer. In our piece on electric vans we made the case that two and three year old examples were where the value sat, and that case is more expensive now than it was when we wrote it.
That does not make it wrong. A used van still carries less depreciation risk than a new one, and the reason prices are up is that demand is there, which is also what makes them easier to sell on. But anyone quoting you summer prices from a summer article is quoting the wrong market.
One more thing, if you are weighing hire purchase against leasing
This tends to get overlooked when people compare monthly figures side by side.
On hire purchase or lease purchase, the van ends up belonging to your business. The equity belongs to you, and so does the ability to refinance against it later.
On contract hire you hand the vehicle back at the end. If values have gone up 11% in the meantime, that movement belongs to the funder. And you cannot refinance something you do not own.
That is not an argument against leasing, which does plenty of useful things, not least keeping monthly costs predictable and taking the disposal risk off your books. It is just a part of the comparison that rarely makes it onto the spreadsheet.
The honest caveats
Two, and they matter.
The £8,820 figure is BCA's average across what went through their lanes. Auction stock skews older and higher mileage than the market as a whole, so it is not a statement about what the average van on a British driveway is worth. Treat it as a direction of travel rather than a valuation.
And two months of rises is a trend, not a law. Used values have climbed before and come back down again. Which is a decent reason to go and find out where you stand now, rather than assuming the numbers will look like this in the spring.
If you want the detail rather than the headline, our van refinance page covers how this works on vehicles you own outright, on vans you bought for cash in the last few weeks, and on vehicles that still have finance running on them.
Business Van Finance
We arrange van finance for UK limited companies and sole traders. Access to 100+ lenders. FCA authorised, FRN 984955.
Find out more →Related Guides
Van Finance by Trade
How van finance works for couriers, electricians, builders, removals and more, trade by trade.
Electric VansIs Now the Time to Buy an Electric Van?
Diesel at £2 a litre and used electric van prices down 28%. The arithmetic that decides it.
Bad CreditVan Finance With Bad Credit UK
What specialist funders look at, realistic deposit expectations, and mistakes that sink adverse credit applications.
Frequently asked questions
Find out what your vehicles are worth to a lender
If your business owns vans, it is worth knowing what they would support today rather than assuming it is the same as the summer. Tell us what you have and what you are trying to do with the money, and we will tell you what is realistic. No obligation and no upfront fees.