Lease Purchase (LP)

What is lease purchase?

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.

As a form of conditional sale agreement, Lease Purchase can be ideal if you want to finance a premium new car, with lower monthly repayments due  to deferring a significant proportion of the amount of credit to the final repayment at the end of the agreement.

 

How does lease purchase work?

Lease purchase shares similarities with other car finance options, like PCP and HP. The process is quite simple - pay for the car in part through monthly payments and in part through a final balloon payment:

• Choose your new car

• You may need to pay an advance payment against the car

• You will then make monthly payments for the length of your contract period

• At the end of the agreement, you’ll pay the Final Lump Sum Repayment in order to own the vehicle

• Alternatively, you may be able pay for the car via a second finance agreement

 

Final Lump Sum Repayment

The Final Lump Sum Repayment is what you’ll need to pay at the end of your agreement in order to own your new car. This payment is calculated on the estimated future value of the vehicle - what the car will be worth at the end of the contract period, taking into account your anticipated mileage, the car’s age and the length of the agreement.

 

Should you get a new car on lease purchase?

Lease purchase can be ideal if you want to get the newest model of car or van - particularly those at the premium end of the market. This is because a lease purchase agreement becomes more affordable if the car holds its value. Monthly payments are also kept low due to the upfront cost of a deposit, and a further payment being deferred until the end of the contract.

Aside from lower monthly payments and the possibility of buying a higher specification car, a further benefit of lease purchase is that - unlike other options, like contract hire - you won’t be subject to mileage limitations and excess mileage clauses.

At the same time, you will need to be aware that a significant amount of credit is deferred until the end of the contract period, that you don’t own the vehicle until the final repayment has been made, and that you don’t have the choice to return the car (unlike with PCP).

Browse our full range of new cars and discount vans - from small city cars and family-friendly hatchbacks to practical MPVs and innovative SUVs. Get in touch with us to learn more about the new car lease purchase options available.