Lease Purchase is an agreement where ownership of the vehicle is transferred to the customer at the end of the contract, subject to all terms & conditions being met. Monthly instalments are calculated taking into consideration the cost of the car, initial rental amount, length of contract, & the final balloon payment.
This funding method is well suited for companies who would like to retain the vehicle at the end of the contract as a company asset. The client can show the vehicle as a balance sheet item they can write down the value against taxable profits & claim capital allowances. This will of course be limited when the new emissions based allowances come into force in April 2009.
This method also provides for a balloon payment that is normally equivalent to the projected market cost of the car at the end of the contract. The VAT cannot be recovered on purchase price of the car ownership, maintenance & disposal risks remain with the customer during the length of the contract