If you want to buy a vehicle outright, but don't have the money to do so immediately then lease purchase could provide an affordable solution. Lease purchase is a method of financing a vehicle that is normally used by VAT registered companies or businesses, which works in a similar fashion to personal contract purchase (PCP) but with some fundamental differences. This guide to lease purchase will explain exactly how it works and how you can find the best lease purchase deals.
Broadly lease purchase is the same as PCP in that the leasing company has a retail value of the car and works out an estimated future value of the vehicle for the end of the contractual period based on its depreciation. This is known as the residual value. You can place a lump sum down-payment on the car upfront and then you make monthly payments on the difference between the retail value and the residual value. As a consequence, the more the vehicle ‘holds its value', the better the deal - meaning luxury cars are often popular for lease purchase deals.
However, there is a fundamental difference between lease purchase and PCP. Whereas PCP gives you the option to buy the car outright at the end of the contractual period, with lease purchase you already have an agreement to buy the car. There is no return option.
Therefore at the end of the lease period, the customer must make a final balloon payment. This may be done through a cash payment or alternatively with additional finance or a part-exchange.
A typical lease purchase agreement will last from two-four years, though with most companies it is possible to settle the agreement at any point during this period.
You should think carefully before entering into a lease purchase agreement because it is not necessarily the right method of car finance for everyone. Here are its advantages:
There are disadvantages to lease purchase too, including:
For private customers, lease purchase is best suited to those who want long finance agreements as this will make your choice of car more affordable. As there is usually no mileage tie-in you can set it at any level depending on how high or low you want the residual value to be.
For businesses, lease purchase requires expert handling. The task of managing a fleet of lease purchase vehicles is not straightforward and you'll need to scout the market thoroughly for the best deals. You can make it work for your business as long as you research thoroughly.
Alfa Romeo Car Leasing --- Audi Car Leasing --- BMW Car Leasing
Fiat Car Leasing --- Ford Car Leasing --- Honda Car Leasing
Hyundai Car Leasing --- Jaguar Car Leasing --- Kia Car Leasing
Land Rover Car Leasing --- Lexus Car Leasing --- Mazda Car Leasing
Mercedes Benz Car Leasing --- Mini Car Leasing --- Peugeot Car Leasing
Renault Car Leasing --- Saab Car Leasing ---
Seat Car Leasing
Skoda Car Leasing --- Subaru Car Leasing --- Suzuki Car Leasing
Toyota Car Leasing --- Vauxhall Car Leasing --- Volkswagen Car Leasing
Volvo Car Leasing
