Overview

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.