What is Contract Purchase?
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.
At the start of the contract the Leasing Company sets the Residual Value of the
vehicle which is then guarantee. This gives you two options at the end of the contract:
Hand the vehicle back to the Leasing Company, if the value of the vehicle is less
than the set Residual Value or you want no hassle in disposing of the vehicle
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 keep the vehicle
or sell it for use as a deposit for your next vehicle.
The vehicle is registered in the Lessor's name (Leasing Company). You can also enjoy
the convenience of full maintenance at a fixed monthly cost. Road Fund Licence is
provided for the full term of the contract.
Who owns the vehicle?
This product is an 'Ownership' style contract where you are making payments with
an option to purchase the vehicle at the end of the contract. Should you take the
maintenance option then this part of the payment would be subject to V.A.T at the
How does the balloon option work?
How do you complete the sale at the end of the contract?
What is the Residual Value (RV) for?
At the start of the contract the leasing company will set the final payment for
the vehicle which is guaranteed at the end of the contract. This gives you a number
of options at the end of the contract:
Hand the vehicle back to the leasing company after the last regular payment is made.
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 on receipt of payment. You
may then keep the vehicle of sell it for use as a deposit for your next 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 has expired and pay the
rentals based on sliding scale of the balloon amount. Vehicle is not returnable
once this informal period commences.
Is Contract Purchase subject to VAT?
The payments for depreciation and interest are not subject to VAT, whereas payments
for services do attract VAT in the usual way.
Contract Purchase arrangements are treated for tax purposes as a purchase by the
customer when the vehicle is brought into use. As a result writing down allowances
can be claimed at the rates in force at the time.
What is the initial outlay to my Customer?
As the Leasing Company is underwriting a business user, the usual contract is three
rentals in advance. However, in some circumstances if business is 'blue chip', one
advance rental may be acceptable. Both of these options provide you with a low cash
outlay for this type of contract.
What Payment Options does my Customer have with Contract Purchase?
There are 3 different Payment/Rental Profiles which support this product:
- Terminal Pause
For a 36 month contract, you will pay 3 rentals in advance, followed by 33 monthly
rentals that are then followed 2 months where no rentals are due up to the end of
- Spread rentals
This is the usual payment profile resulting in a lower monthly rental than 'terminal
pause' with the same length of contract. If you take a 36 month contract you will
pay 3 rentals in advance followed by 35 monthly rentals, the contract ends in month
- Enhanced deposit
This is used when you want to put a lump sum down as an initial payment or have
a part exchange you wish to use against a deposit; it has the effect of reducing
the monthly rental. If you take out a 36 month contract, you will pay 1 rental (no
less than an equivalent 3 rentals in advance) followed by 35 monthly rentals, the
contract ends in month 36.
What services are available on a Maintenance Agreement for Contract Purchase?
Who do I call to arrange a service on my Contract Purchase Vehicle?
How often should a service be carried out on a Contract Purchase vehicle?
Your contract can include servicing, routine maintenance, unlimited tyres, exhausts
Items excluded are glass and damaged items.
Arranging this is easy, we have a DriverLine telephone service where you can call
to arrange the following:
- Service bookings with FREE collection and delivery including ‚'wash and vac'
- Breakdown and recovery services (Optional with a maintenance or non maintenance
- Tyre replacement service with mobile fitting available
- Foreign travel documentation and advice
Services should be carried out as scheduled in the manufacturer's handbook, failure
to follow could invalidate the vehicle manufacturers warranty.
Does the Leasing Company insure the Contract Purchase Vehicle?
No. It is your responsibility to insure the vehicle. Please see the Terms &
Conditions of the contract.