Lease Purchase (LP)
Lease Purchase is structured in the same way as a Personal Contract Purchase (PCP) in that a capital lump sum amount, known as the Residual Value (RV), is deferred to the end of the agreement. However, unlike PCP, Lease Purchase offers no option to return the vehicle to the finance company at the end of the contract. It is the customers' responsibility to settle the final balloon payment either though additional finance, or cash settlement.
Lease Purchase agreements are typically repaid over a 2, 3 or 4 year period with the option to settle the agreement at any stage.
There are three factors which determine the monthly repayments. The total deposit payable, the period of the contract and Residual Value of the vehicle. So for example if you were looking to lower the monthly repayments you would need to either place a larger deposit, increase the term of the loan, or set a lower annual mileage to increase the RV and in turn lower the monthly payments.
Benefits of Lease Purchase to the private individual:
- Reduced fixed monthly payments due to the deferred ‘balloon’ payment.
- Outright ownership when the final deferred payment is made.
- 100% of any proceeds from selling the vehicle is the customers'.
Benefits of Lease Purchase to business':
- Gain an additional credit line.
- Do not have to pay VAT on repayments..
- Show their vehicle as an asset on the Balance Sheet.
- Gain a Writing-Down Tax Allowance.
- Can deduct interest charges as a business expense.
Historically manufacturers tend to introduce price increases around the end of the summer. We would strongly advise our customers to place their orders early to protect themselves from any potential price increases and to ensure an early 60 registered delivery.
