Lease Purchase (Hire Purchase with a Balloon)
Lease Purchase also known as Hire Purchase with a Balloon, is similar to a standard Hire Purchase (HP) finance plan. However your monthly repayments are reduced by deferring a proportion of your balance, a balloon payment, to the end of your finance agreement.
Lease Purchase is available to business customers and private individuals. It helps you spread the cost of your asset with lower monthly payments to suit your budget, with the option to purchase at the end of the agreement.
At the start of the agreement you simply decide an initial deposit, typically 10%–50% of the purchasing price and choose your agreement term usually between 12–60 months.
Your equal monthly payments including interest payable, and a final agreed deferred balloon payment are then calculated.
At the end of the agreement you then have a number of options.
Pay the deferred final balloon payment, plus an Option To Purchase Fee, the title of the asset will then be transferred into your name.
Part-exchange the asset subject to settlement of your existing credit agreement.
Refinance the final balloon payment.
Sell the vehicle or asset privately, once the balloon payment has been paid.
Why choose Lease Purchase?
- Flexible deposit and term with no mileage restrictions
- Fixed monthly payments for ease of budgeting and to conserve your cash flow
- Ownership at the end of the agreement
- Deferred balloon payment reduces your monthly instalments
- Tax allowances for business users
- Asset appears on business balance sheet and can be wrote down against taxable profits
- Monthly repayments are not subject to VAT
The credit agreement is secured against the asset for the duration of the agreement. This means the creditor remains the legal owner of the asset until the final payment has been made.
For further information or to discuss how Chatsbrook can help you or your business please contact us here.