Contract Purchase

Contract Purchase is similar to Contract Hire but with even greater flexibility. Contract Purchase is designed to give all the operational benefits of Contract Hire including maintenance, Road Fund Licence and relief vehicle, without the VAT implications of a lease. It therefore appeals to professions and businesses that are not VAT registered.

Cash Flow Benefits of Contract Purchase

The initial deposit of a contract purchase agreement is normally expressed as monthly payments in advance and is followed by fixed monthly payments; you know exactly what your monthly motoring costs will be.

Tax Implications of Contract Purchase

Contract purchase gives you similar tax and financial benefits are the same as Lease Purchase and Hire Purchase, in that business users may claim tax relief on the interest charged. The vehicle is also classified as an asset, which allows it to be written down against taxable profits by 25% or £3000 (maximum per annum).

Who Owns The Vehicle at the End of a Contract Purchase Agreement?

The final balloon payment of contract purchase is a Guaranteed Future Value. You have the option of either taking ownership, disposing of the vehicle yourself (if you wish to take advantage of a profit opportunity) or simply returning the vehicle to the finance company.