Lease Purchase

Lease Purchase

Also commonly known as "Contract Purchase", Lease Purchase is in essence the same as a Hire Purchase Agreement but structured in such a way as to reduce the demand on front end cash required and to take advantage of the residual value to defray monthly instalments In all other respects, managing, accounting and VAT are treated exactly as a Hire Purchase Agreement.

Whilst no deposit as such is required the lender may require that one, two or three months payments be paid in advance. This is negotiable and dependent on the hirer’s financial and credit worthy status. The final terminal payment whilst not linked directly to the sale of the vehicle is normally set at an agreed residual value and is paid out of the sale of the vehicle. The hirer is at risk in that he must make up any shortfall should the condition of the vehicle or market forces not produce the sale value as predicted Equally he would benefit from any surplus.

Lease Purchase was specifically designed to minimise cash flow whilst maintaining the full capital writing down allowance, which would be lost under a Lease Rental agreement.

Lease Purchase can be a more tax efficient way of financing higher cost cars than Lease Rental but can have similar cash flow advantages.

Other fleet purchase options:

Outright Purchase

Hire Purchase