Business contract purchase guide

What is Business Contract Purchase?

As an alternative to business contract hire, this product is ideal for companies who would like a high value vehicle and have the option to purchase it at the end of the contract but does not want any depreciation risks.

Business contract purchase offers the customer many of the 'no risk' advantages of business contract hire, as well as the option of maintenance packages. It also allows the customer the option to purchase the vehicle at the end of the agreement at a guaranteed price.

Road fund license is still provided for the full term of the contract and the vehicle will remain registered in the finance company's name.

At the start of the agreement the finance company sets the final payment under the contract. This gives the customer a number of options at the end of the contract.

1. Hand the vehicle back
The customer simply arranges for the leasing company to collect the vehicle at no further cost, providing no excess mileage charges apply and the vehicle is returned within the fair wear and tear guidelines.

2. Purchasing the car
The customer can choose to pay the option to purchase fee and the final rental. Once this has been done, the finance company will transfer ownership of the vehicle to the customer. The customer may sell it for use as a deposit for their new vehicle.

3. Re-finance the final rental
This option is subject to credit and 28 days notice is required prior to contract expiry date. The customer can then choose to lease the vehicle for longer, at a newly calculated rental based on the guaranteed future value.

4. Keep the vehicle for a further 12 months
This can only be done once the contract has expired, paying the rentals on a sliding scale of the balloon amount. The vehicle is then non-returnable after this period commences.
1. VAT recoverability
The payments for depreciation and interest are NOT subject to VAT.

2. Tax allowances
Business contract purchase arrangements are treated for tax purposes as a purchase by the customer where the vehicle is bought into use. As a result the 25% writing down allowance is claimed by the customer (maximum of £3000 per annum).

Other business finance products you may be interested in are:

business contract hire guide
Business contract hire is the most popular type of lease available in the UK.

Learn more

business operating leasing guide
A business operating lease is a cost-effective way of financing a vehicle for a business individual.

Learn more

business finance lease guide
A popular way of funding business commercial vehicles when contract hire is not a suitable option.

Learn more

business lease purchase guide
A business lease purchase is for those who wish to buy a vehicle but don't have the immediate finances.

Learn more

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