What is Contract Purchase?
Contract Purchase is a flexible product that offers you either the option to purchase the vehicle at the end of the contract should you wish, or, you can return it to the funder, charges may apply and will be subject to the vehicle being free from accident damage and excess mileage. It has the same flexibility as Contract Hire with the options to tailor your agreement to your requirements.
Below gives you a good idea of how the rentals are calculated, the benefits and points to consider about this product before choosing it.
What affects the Monthly Rental Price?
A number of factors come into play when calculating the monthly rental and these need to be considered when thinking about which vehicle to lease. The team here are happy to discuss these in detail, we believe it important you make an informed decision that is right for you.
Vehicle Purchase Price - This a big factor, the more expensive the vehicle generally the more you can expect your rental to be, although strong residual values can sometimes buck this trend, resulting in a nice surprise. We automatically source and negotiate vehicles at the most competitive price we can and don’t worry, we only buy from the manufactures franchised dealers.
Residual Value – The amount the funder believes the vehicle will be worth at the end of the contract term. They decide this based on how old the vehicle will be and how many miles will be on the clock at this point (and condition of course), they monitor previous sales of the vehicles closely and constantly monitor industry data, which gives them a good idea of where to set it in the first place. The good news is - If they get it wrong and it sells for less than they had hoped to, it’s not your problem!
Mileage & Contract Length – The more miles you do, the more the value of the vehicle drops, so of course your rental will be higher. Contract Length can have a varying impact, normally the longer you have the vehicle the lower the rental, but this is not always the case.
Maintained Contracts - You can choose to include the full maintenance package also, this includes; servicing, mechanical repairs, tyre replacement and comprehensive breakdown cover. Ideal if you do not want any surprise bills and a fixed monthly cost!
The Key Benefits of Contract Purchase
- Minimum initial payment (deposit, typically three months in advance)
- Fixed Monthly Costs, making budgeting easier.
- Vehicle shows as a balance sheet asset.
- Vehicle tax, RFL is included throughout the contract term.
- Option to retain the vehicle at the end of contract, once the final balloon payment has been paid.
Points to Consider
- Early Termination of the contract can be expensive.
- If you exceed your agreed mileage you will be charged a pence per mile at a rate agreed in your contract.
- You are responsible for insuring the vehicle on a fully comprehensive policy.
- Outstanding instalments appear as a liability on balance sheet.