Lease Purchase
Representative Example
Rates from 9.9% APR, Representative APR 21.4%. Borrowing £10,000 over 60 months with a representative APR of 21.4% fixed rate, monthly payment £260.83, Total cost of credit £5,650, total amount repayable £15,750.Presto Finance Ltd is a credit broker, not a lender.
What is a Lease Purchase?
Lease Purchase is a type of vehicle finance designed for individuals or businesses who want to eventually own a vehicle but may not have the funds to buy it outright immediately. This option is particularly suited for non-VAT registered customers who plan to take ownership at the end of the agreement.
Lease Purchase is flexible, allowing you to reduce monthly payments by increasing the initial deposit. Monthly costs are calculated based on the vehicle's retail value minus its depreciation, plus interest. Choosing a vehicle with strong resale value can work in your favour.
Unlike Contract Purchase, where you have the choice to buy the vehicle at the end of the term, Lease Purchase commits you to ownership once the agreement ends. This option is best for those certain they want to own the vehicle and can pay any balloon payment due.
Lease Purchase agreements typically last between 2 to 4 years, though you can settle the agreement at any time during the contract.
Get your no-obligation car finance quote in 60 seconds!
Advantages of Lease Purchase:
- Low Initial Payment: Start with a smaller upfront cost.
- Fixed Mileage Contract: Clear and predictable usage limits.
- Ownership Focused: Ideal for non-VAT registered customers aiming to own the vehicle.
- Effective Budgeting: A balloon payment at the end makes monthly payments more manageable.
- No VAT on Payments: Monthly payments are not subject to VAT.
- Company Asset: The vehicle becomes a company asset, appearing on your balance sheet.
- Tax Efficiency: Record the vehicle's value against taxable profits.
- Financial Flexibility: Frees up funds for other aspects of your business.
Disadvantages of Lease Purchase:
- Balloon Payment Requirement: Ownership requires paying the balloon payment at the end.
- High Balloon Risk: In some cases, the balloon payment may exceed the vehicle's residual value.
- No Maintenance Included: Lease Purchase is a dedicated funding product and doesn't include maintenance or value-added services.
- Insurance Requirement: Fully comprehensive insurance is mandatory.
