Contract Purchase is an ideal way to fund your car if you are not VAT registered or if you are buying a higher value vehicle. Payments are, as with Contract Hire, based on the period, mileage and cost and anticipated depreciation of the vehicle and any service and maintenance packages you may have included.
In addition it also allows you the flexibility to purchase the vehicle at the end of the agreement and there are 4 options offered to you at the end of the contract:
1 Make the final pre-agreed 'balloon' payment and keep the vehicle
2 Should you not have the funds to pay the balloon payment the agreement can be extended by spreading the `balloon` payment over a further period
3 Trade the vehicle in, any available equity to form a deposit for your replacement vehicle.
4 Return the vehicle without making the ‘balloon’ payment. This releases you from further obligations, except for any excess mileage or vehicle damage.
As the vehicle is accounted for as a balance sheet asset this allows you to claim full capital allowances. Also as the customer is ultimately purchasing the car, the finance provider cannot reclaim the VAT on the purchase price of the car, and therefore VAT is not charged on the monthly rental.
Benefits:
- Flexible deposits
- Maintenance package available
- Ability to renew vehicle regularly
- Lower monthly payments
- Payments not subject to VAT
- For new or used vehicles (up to 6 yrs old at the end of contract)
- Ability to take ownership at end of agreement
- Repayments in advance or arrears
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