Lease Purchase

Lease Purchase is similar to Hire Purchase but allows you greater flexibility with regards to payments.

Cash Flow Benefits of Lease Purchase

The initial deposit of a lease purchase is normally expressed as monthly payments in advance and is much lower than traditional HP, and a final lump sum or balloon payment (sometimes called a residual value) is usually included. This has the effect of reducing the amount of the monthly payments, thereby aiding cash flow. As with Finance Lease disposal of the vehicle, particularly to cover any balloon payment is the responsibility of the user. Balloon payments on this type of agreement can always be refinanced (subject to status).

Tax Implications of Lease Purchase

The tax and financial benefits of a Lease Purchase agreement are the same as 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).

However the payments of a lease purchase agreement can be structured to suit a businesses particular cash flow needs.

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

After paying the balloon payment, ownership of the vehicle can be taken, or it can be part exchanged or sold using any surplus equity towards a deposit for a new vehicle after settling the balloon.