Lease Purchase - Suitability explanation
Lease Purchase (LP) is very similar to Hire Purchase, but with the addition of a larger final payment. This means that a proportion of a vehicle’s initial cost is deferred until the last month of the contract, therefore lowering the amount that is paid in the subsequent months of the agreement.
Lease Purchase may not be suitable for you in certain circumstances. For example:
There is no option to return the vehicle as by entering into a Lease Purchase deal, you have already agreed to purchase the vehicle.
Benefits of Lease Purchase:
Vehicle is registered in the company name
Road fund licence is only included for the first year
On balance sheet
Fixed monthly payments not subject to VAT
No mileage restriction
Portion of initial cost deferred until last month of the contract
Taking care of the vehicle:
You must ensure that the vehicle is always comprehensively insured.
You must pay any additional charges that you incur for example a parking fine or congestion charge on time. If you don’t, the cost and/or fine will be issued to the finance company who will invoice this to you together with an administration charge that they will levy.
You must have the vehicle serviced and maintained by a main franchised dealer in accordance with the manufacturer’s recommendations and keep it roadworthy. If you do not service and maintain the vehicle, the funder will make a charge when the vehicle is returned as this will affect its value. You may add a cost-effective maintenance package which will cover routine servicing, maintenance costs and tyres, subject to fair wear and tear plus breakdown assistance to enable easy budgeting and give you fixed cost motoring. If you include a maintenance package please note the funder may decline to settle any charges if the total mileage on the agreement is exceeded.
Failure to make payments in full and on time may result in the contract being terminated and the vehicle repossesed. Only enter in to an agreement if you are comfortable with the financial commitment and terms.