Lease Purchase

Lease Purchase is in essence a hire purchase agreement but with features specifically designed for the business user market.

Advantages

• The assets or vehicle(s) can be used immediately
• Repayments can be staggered
• Up to date technology can be hired and used to increase efficiency and productivity
• Transaction is secured ONLY on the assets covered by the finance arrangement
• Future budget projections and planning can be simplified and more accurate
• Reduced payments with a final 'balloon' payment
• Fixed interest rate
• Rentals not subject to VAT
• Ownership of the vehicle or asset at the end of agreement upon exercising the 'option to purchase'
• Inflation proof payments

Disadvantages

• You cannot claim capital allowances if you lease assets.
• You might have to put down a deposit or make payments in advance
• The user incurs residual value risk
• Your company will need to be in a sound financial position to meet the end of term balloon lump sum
• vulnerability to residual value decreases and unpredictable maintenance and repair costs
• Vehicles will appear on balance sheet as assets, which may prove disadvantageous for new, small businesses
• Difficult to terminate inflexible medium or long-term agreements
• Potential for more administration. Particularly against buying outright
• Complexity of agreement
• Your company will normally have to be VAT-registered to take out a leasing agreement

Hire Purchase
You will pay an initial deposit after which, the balance of the purchase price is repaid by monthly payments. The agreement is normally set at between one to four years and when all the payments have been made you become the owner of the vehicle.

Straightforward payment structures are available. There are a number of flexible options which will enable you to increase the initial deposit and adjust the level of your monthly costs.

Finance Lease
A popular flexible method of funding a broad spectrum of assets. A Finance Lease offers all the practical benefits of ownership but without any of the potential burdens.

Operating Lease
Particularly recommended for high value and specialised assets and vehicles, Operating Lease will guarantee residual value of the asset which means the repayments are lower than traditional finance.

Finance Leasing
In effect you will acquire all the financial benefits and risks without actually acquiring legal title. The leasing rate is calculated in order to collect the full value of the asset (plus finance charges) during the contract period. In most cases you will not be able to become the owner of the asset at any time. Although it is possible to extend the duration of the lease.

Operating Lease
Mostly with a shorter time frame than financial leasing (will always be significantly shorter than the working life of the asset), an operating lease is more like a regular rental. The lessor will expect to be able to either sell the asset or to lease it again and will thus not need to recover the total asset value through your lease payments. There may be an option to extend the leasing period at the end.

FAQ
What can I lease?
You can lease purchase nearly everything relevant to your business. From equipment valued at a few hundred pounds to specialised assets worth millions of pounds.

Can I Lease Purchase My Car?
Yes it is possible to secure your vehicle by lease purchase. This method of financing your vehicle is often chosen by VAT registered businesses or companies. The monthly rental is determined by the cost of the vehicle, the period and the estimated future value of the vehicle which is based on the proposed annual mileage.

What is the lease rate or payment?
This is the regular 'rental' payment you make under the lease purchase agreement to gain access to and use the asset. The lease rate or payment is determined by the total cost of the asset, the length of the lease and the relevant interest rate level.

What is a lease purchase term?
This refers to the period of time you agree to lease the asset from the lessor.