What is it?

Contract Purchase is a flexible arrangement that’s popular with many businesses due to the variety of options it offers. You simply put down a deposit, make regular payments and at the end of the agreement you have three alternatives: you can return the car with nothing more to pay (subject to mileage and condition), you can pay the Guaranteed Future Value and keep the car, or you can use any equity as part exchange to buy another car.

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How does it work?

  • You agree an estimated annual mileage for the vehicle, and this is used to determine the vehicle’s Guaranteed Future Value (GFV), sometimes known as Optional Final Payment
  • You agree on a deposit, and this figure combined with the agreement duration, will determine the amount of your monthly payment
  • After signing the agreement, you make the monthly payments including interest and fees

At the end of the repayment period you have three options:

Features and Benefits

  • A guaranteed fixed monthly payment, allowing you to budget with confidence
  • Potentially lower payments than a Lease Purchase agreement without a balloon
  • Variety of options at the end of the agreement
  • Allows you to match the length of your agreement with the time you want to keep the car

Other things you should know

  • The agreement is secured against the car. If you do not keep up your repayments, we may take steps to recover the money owed, which may include repossession of the car
  • A higher deposit will reduce the monthly repayments. However it will not change the GFV set at the start of the agreement, or the valuation at the end of the agreement
  • At the end of the agreement it is possible there may not be any equity (the difference between the final payment and the value of your car)
  • If you return the car at the end of the agreement and it has covered more miles than agreed, you will be required to pay a charge for excess mileage. Also, if you have not kept the vehicle in reasonable condition for its age and mileage you may be charged a refurbishment cost
  • Vehicle finance for business can be a complex subject. The right finance plan will depend on several factors including business status, cash flow, other borrowings and tax planning
  • We strongly advise you to seek professional help from the business expert at your local car dealer or speak to a financial adviser
  • Contract Purchase is only available to limited companies, PLCs or limited liability partnerships on a non-regulated basis
  • If you decide to retain the car you only become the owner when all payments under the agreement have been made