For people who would like to own a vehicle without up-front financing. Lease Purchase is ideal for non-VAT registered customers who eventually wish to take ownership. - A flexible product, allowing a larger initial payment to help reduce monthly payments.
Monthly payments are worked out on the difference between the retail value and the depreciation value, plus interest. Consequently, choosing Lease Purchase for a vehicle which holds its value will be better value.
Lease Purchase is only for those who want to take vehicle ownership at the end of the contract and pay any balloon payments attached. - You enter into the contract with the decision to purchase the vehicle at the end.
Lease Purchase agreements are typically for 2-4 years, although the agreement can be settled at any time.
Lease Purchase. (LP)
Advantages of LP
· Low initial payment.
· Fixed mileage contract.
· Ideal for non-VAT registered customers who want eventual ownership.
· Effective budgeting with balloon facility; vehicle ownership is acquired once the balloon has been paid in full at the end.
· No VAT liable on monthly payments.
· If a business contract, the vehicle becomes a company asset.
· Lease Purchase frees up finance
· The vehicle will appear on your balance sheet and you can record the value against taxable profits.
Disadvantages of LP
· The balloon payment must be paid at the end
· The vehicle is yours once you have paid the balloon payment. In some cases, the balloon can be higher than the residual value.
· No option to include maintenance or any other service.
Not to be confused with Contract Purchase where you can choose to purchase the vehicle at the end of the contract. This is optional however, you can choose to hand the vehicle back instead, in a similar way to a contract hire agreement.
Please note that Simply Vehicle Leasing, a trading style of New Car Deals Ltd, do not currently offer this finance product.