Contract Purchase is essential Hire Purchase but with a final payment (balloon) at the end of the agreement. This makes this a very popular finance option due to its flexibilty. With Contract Purchase you pay a set monthly fee for an agreed period of time at which point you then have 3 options:

• Re-finance or pay off the final payment if you want to keep the asset
• Trade in or Part Exchange the asset against a new asset
• Hand the asset back to the finance company (subject to restrictions)

Benefits of Contract Purchase

• You have the option to own the asset at the end of the agreement
• The final payment is agreed at the start of the agreement, therefore eliminating market influences
• The monthly payments are affordable due to the balloon
• The car can be depreciated in a companies accounts which enables tax effieciencies
• You can hand the asset back at the end of the agreement
• If the asset is worth more that the final value at the end of the agreement, the difference is yours to keep

Potential Risks

• If the agreement is taken out on a vehicle, you are responsible for taxing the vehicle every year
• In most cases the monthly payments are slightly higher than Contract Hire
• You are still subject to certain conditions and restrictions, especially if you plan on handing the asset back at the end of the agreement

Ready to find out more?

Drop us a line today for a free quote!