Structurally similar to Contract Hire, Contract Purchase enables an organisation
to make fixed monthly payments. However, with Contract Purchase you have the option
of retaining the vehicle at the end of the contract.
A guaranteed residual value, resulting in lower monthly payments, is set by the
Leasing Company at the start of the contract, which gives you the customer two options
at the end of the contract:
Hand the vehicle back to the Leasing Company
Keep the vehicle by paying the outstanding residual value and using any equity as
a deposit for the next vehicle.
Key customer benefits:
- The option to retain the vehicle at the end of the contract – without any depreciation
- Choosing vehicles with low CO2 emissions will result in higher capital allowances
- Road Fund Licence is provided for the full term of the contract
- The convenience of a full maintenance service, at a fixed monthly cost, is available.
Contract Purchase is ideal for companies who utilise high value cars and prefer
funding flexibility along with the opportunity of owning the vehicle without the
What is Contract Purchase?
Contract Purchase is a hire purchase agreement provided by the Leasing Company and
if applicable may be regulated by the Consumer Credit Act 1974.
As an alternative to Contract Hire, this product is ideal for companies who would
like a high value vehicle and have the option to purchase the vehicle at the end
of the contract but do not want any depreciation risks.
Contract Purchase offers you many of the ‘no risk’ advantages of Contract Hire.
This is also coupled with an optional service and maintenance package. It also allows
you the Customer to purchase the vehicle at the end of the agreement for a guaranteed
price if you wish.
Road Fund License is provided for the full term of the contract.
The vehicle is registered in the Lessor’s name (the Leasing Company).
How does it work?
What happens at end of the contract?
At the start of the agreement the Leasing Company sets the final payment under the
contract. This gives you a number of options at the end of the contract
Hand the vehicle back to the Leasing Company – Contact us to arrange
collection of the vehicle (3 working days notice is required minimum). You will
receive a copy of the hand over appraisal form with the end mileage. Any damage
on the vehicle or missing service history, keys etc will be charged as detailed
in the Leasing Company’s ‘Fair Wear & Tear Guides’ which can be forwarded on request.
You may choose to pay the option to purchase fee and the final rental
- the Leasing Company will transfer ownership of the vehicle to you. You may then
either keep the vehicle or sell it for use as a deposit for your new vehicle.
Re-Finance the final rental if applicable subject to credit - 28
days notice is required prior to contract expiry date.
Keep the vehicle for a further 12 months – once the contract expires
and pay the rentals based on sliding scale of the balloon amount. Vehicle is not
returnable once this informal period commences.
What are the financial benefits?
(a) VAT Recoverability
The payments for depreciation and interest are NOT subject to VAT, whereas payments
for services bear VAT in the usual way.
(b) Tax Allowances
Contract Purchase arrangements are treated for tax purposes as a purchase by the
customer when the vehicle is brought into use. As a result the writing down allowance
can be claimed claimed in accordance with current legislation.