Contract Purchase
Contract Purchase is for business customers looking to fund a new vehicle in a manageable way. A little like hire purchase. The monthly payments are not subject to VAT, but if you do take out the optional service package you will have to pay VAT on the service costs. This type of funding is ideal for businesses that would like options at the end of its finance agreement.
Customers make an initial payment when they first take out the contract, then pay fixed monthly payments and finally have an Optional Final Payment at the end of the contract. You can keep the van by making this final payment, trade-in your vehicle at a dealership and take another vehicle from them or simply return the vehicle to the funder.
Advantages: Low initial payment; Fixed monthly payments; No depreciation concerns if you want to walk away at the end; Maintenance and servicing can be included; Cost effective
Disadvantages: You must have fully comprehensive vehicle insurance
Lease Purchase
The main difference between Lease Purchase and Contract Purchase is that with Lease Purchase you enter into an agreement to buy the van at the end of the contract while with Contract Purchase you have the choice to buy or not.
Lease Purchase normally lasts 2-4 years and is for people who would like to own a vehicle but don’t have the money to buy one immediately. It’s ideal for non VAT registered customer who eventually wants to own the van they are buying.
You have the flexibility of putting down a larger initial payment to reduce the monthly payments. which are worked out on the difference between the cost of the vehicle and the depreciation value plus interest.
Advantages: Monthly payments are not subject to VAT; The vehicle will become a company asset; Lease Purchase frees up finance for other aspects of your company; Low initial payment.
Disadvantages: In some cases the larger final payment can be larger than the value of the van; No maintenance included.
Leave A Comment