Contract Purchase is the ideal choice for businesses who want a high value vehicle with the option to buy on completion of the contract; but without any of the depreciation risks. At the beginning of the agreement, your finance company will set a residual value for your vehicle which they can promise for the end of your contract. This provides the customer with two options at the end of their contract:
- Return the vehicle if the value of it is less than the fixed residual value or if the individual simply wants to avoid the hassle of disposal/resale.
- Pay the purchase fee and final instalments and take full possession of the vehicle.
With a contract purchase deal you can also take advantage of a full maintenance service for a set monthly expense.
How Does the Customer Complete the End of the Contract?
At the very start of your agreement the finance company will set a final payment amount which they can guarantee at the end of your deal. This provides you with a number of options:
- Give the vehicle back to the finance company.
- Pay the option to purchase cost and final rental fees, making you the owner of the vehicle.
- Re-finance the final rental fee if applicable, subject to credit.
The payments towards depreciation and interest are not subject to VAT. Payments for services attract VAT in the typical way. This type of agreement is treated as a purchase by the customer, for tax purposes, when the vehicle is brought into use.
Finance leasing is an option usually exercised by VAT registered companies and organisations. It is usually recommended to companies where a moveable asset (vehicle) is bought from a supplier.Learn More Most Popular
Contract hire, often referred to as car leasing, is perhaps the most popular form of a vehicle leasing contract available on the market today.Learn More
Contract Purchase is the ideal choice for businesses who want a high value vehicle with the option to buy on completion of the contract; but without any of the depreciation risks.Learn More
Generally, a lease purchase deal is very similar to a PCP agreement. After making an initial deposit upfront, instalments are calculated on the difference between the vehicles retail cost and the expected residual value come the end of the contract.Learn More
Personal Contract Purchase
Personal contract purchase, or PCP, works on the same premises as PCH (personal contract hire) but with a significant difference. On completion of the deal, there is a voluntary balloon payment you can choose to fulfil in order to take full possession of the vehicle.Learn More
Personal Contract Hire
Personal contract hire (PCH) is fundamentally equal to ordinary contract hire but it is only available to private individuals. This represents the most common form of leasing and is what most people refer to as ‘car leasing.’Learn More