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Lease purchase is a method of financing a vehicle, normally for VAT registered businesses or companies. The monthly rental is determined by the cost of the vehicle, the period and the estimated future value of the vehicle, which is based on the proposed annual mileage. It is a cheaper monthly alternative to Hire Purchase, and has the same benefits, with the added benefits of a residual value, deferring capital repayments until the end of the agreement. This therefore reduces the monthly payments accordingly leaving a "balloon" amount payable at the end of the agreement. Deposits can either be quoted as a percentage of cost or as a number of advance monthly payments. Repayment periods are normally taken over 3 to 4 years and maintenance packages are often available. At the end of the agreement you have two options, payment of the residual value in cash or settlement by part-exchange. Some lenders will allow the residual value to be spread over a secondary period. Benefits: - Similar to HP, with added benefits - Low deposits available - Option to make balloon payment over a secondary period - Cost effective rentals by taking residual values - Customer ownership. |
