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Contract Purchase is an ideal solution for businesses that want more flexibility and reduced risk at the end of their contract, whether that’s because they run high-priced vehicles or wish to own them at the end of the term.
Contract Purchase is a deferred purchase agreement where you’ll make an initial payment, followed by regular fixed monthly amounts with a final balloon payment at the end of the contract, whereby ownership passes to your business.
You’ll have the flexibility to settle the agreement early, and we will guarantee the resale value at the start of the term, both helpful options if you’re unsure of your future business plans.
Contract Purchase is a great path to ownership with fixed monthly payments and reduced financial risk when it comes to the end of the agreement, but how does it work?
An initial rental is paid, followed by equal monthly payments for the rest of the term.
You can keep the vehicle, sell it yourself, or sell it back to us at the pre-agreed buy-back price.
Purchased vehicles will sit as assets on the business’s balance sheet and can be written down against pre-tax profits, in line with current HMRC allowances.
Company car drivers are still taxed in the same way, based on P11D and Benefit in Kind (BiK) values.
VAT is paid at the start within the purchase cost of the car, so there’s no VAT on the monthly payments.
The difference between Contract Hire and Contract Purchase is ownership.
Contract Hire is more like a long-term rental, where the business is effectively hiring the vehicle from the finance company, then simply handing it back at the end of the term.
There are also early termination fees if you want to end the agreement early.
Contract Purchase is best thought of as a deposit at the start and balloon payment at the end – you are only financing the ‘bit in the middle’.
Meaning much lower monthly payments than with a Contract Hire agreement where you are settling the entire remaining balance via each monthly instalment.
Keeping up with servicing, replacement tyres, and repairs can bring unexpected costs, but adding a Service Maintenance and Repair (SMR) plan to your monthly fixed payments will help you budget, all while being 100% tax allowable and 100% VAT reclaimable.
All our SMR plans come with Driverline, our 24/7, 365 days a year driver support service to help increase fleet uptime. Our team are available on the phone and via our web app if you need roadside assistance, accident management or maintenance bookings, such as same-day servicing and repairs.
Fixed monthly costs with the option to purchase the vehicle at the end of the term; Contract Purchase reduces risk while aiding cash flow. You’ll also benefit from a dedicated account manager and access to Driverline, our 24/7 driver assistance service.