Hire Purchase with Balloon - Lease Purchase
Lease Purchase is also known as Hire Purchase with a 'balloon' payment and offers lower monthly payments than Hire Purchase. At the end of the agreement you have the option of making a final lump sum payment ('balloon') to own your car. It is fixed rate finance with lower monthly payments because you defer repayment of some of the borrowing. The deposit you pay is flexible, typically between 10% and 50% of the vehicle cost and the deferred balloon payment is calculated on the estimated future resale value of the car. Payments are usually spread over 12 to 60 months. It is similar to Personal Contract Purchase but there is no guarantee at the end of the agreement but this does usually mean you can benefit from a lower finance rate. At the end of the agreement you have the options of purchasing the car, refinance, part exchange or private sale.
What to do first?
Determine your annual mileage. The estimated future value and final guaranteed 'balloon' payment is then calculated. You agree a deposit, your term and monthly payments.
What are the benefits?
- Lower deposit keeps your valuable personal or business cash available
- Low fixed monthly payments, perfect for budgeting
- Asset - you gain vehicle ownership
- Fixed interest protects you from interest rate fluctuations
- A better car with lower payments than standard Hire Purchase, allowing you to choose a higher specification car
- Flexibility, not using your bank facility
- Tax allowances for business users
- No lock in - settlement can be made at any stage of the agreement
- No VAT to pay
What about excess mileage?
There is no tie to a mileage contract.
What about 'wear and tear'?
At the end of the agreement the vehicle may be worth more than the agreed residual value if it is well maintained, so it is in your own interest to minimise the vehicle's 'wear and tear' to help its resale value.
Finance packages are subject to status and finance company acceptance. UK residents only.