Business Contract Purchase


Business Contract purchase is a finance agreement for VAT registered companies and businesses that want to own their vehicles but want to avoid the risk of depreciating assets.

Will it work for your business?

If your company leases a vehicle on a contract purchase basis, you then pay for the vehicle in monthly instalments for a contract of 24, 36, 48 or 60 months.

At the end of the contract, the company or driver can then purchase the car for a preset amount – known as a balloon payment – as long as the terms of the initial agreement have been met.

Contract purchase is ideal for businesses that like to run high value vehicles and don’t want to have to worry about the risk of depreciation.

If yours is a VAT registered company, you will not have to pay VAT on the monthly finance payments. It’s worth noting, however, that if you take out an optional service or maintenance package, VAT is payable on the service costs.

Will my company be eligible?

Contract purchase is available to financially eligible limited companies, partnerships and sole traders. 

The key features of business contract purchase 

  • A guaranteed residual value – otherwise known as the balloon payment – is agreed at the start of the contract
  • Fixed monthly payments cover the rental of the vehicle, plus any maintenance options if chosen, throughout the duration of the contract

The monthly payments are calculated by taking the following into consideration:

  • The cost of the vehicle.
  • The term.
  • Agreed residual value (balloon payment) to be paid at the end of the agreement.
  • Mileage allowance (as decided by you before the start of your contract).
  • Any additional options, such as a maintenance package.
  • At the end of agreement, when all payments have been made, ownership passes to the customer.
  • Vehicle tax is provided for the first 12 months of the contract.

The key benefits of contract purchase for your business

  • Low initial rental.
  • Fixed monthly payments to make budgeting easier.
  • Flexible terms to meet your company’s requirements, with variable contract duration and mileage terms.
  • The finance company guarantees the resale value of the vehicle at the end of the agreement for a known fixed amount.
  • Maintenance and other added value services can be included in the contract.
  • The value of the vehicle can be written down against taxable profits.
  • If yours is a VAT registered company, you will not have to pay VAT on the monthly finance payments.

Considerations for Business Contract Purchase

  • At the end of the contract, you must decide whether to sell the vehicle, return it to the finance provider or purchase the vehicle at an agreed price.
  • Vehicle must be insured fully comprehensive.

What happens at the end of the contract?

At the end of the contract, you don’t have to purchase the vehicle – it’s just one of the options available. There are three options:

  • Hand the vehicle back to the leasing provider.
  • Pay the purchase fee and the final balloon payment amount outright and own the vehicle.
  • Refinance the final rental amount if applicable, subject to credit – that means pay the balloon payment in monthly instalments. At the end of these payments, you own the vehicle.
  • The small print *

    All offers are subject to change at any time, you must be 18 or over and finance is subject to status, vehicle availability and terms and conditions apply. We can introduce you to a limited number of finance companies, a commission may be received. Failure to maintain payments may result in termination of your agreement and the vehicle being returned, this could affect your credit rating and make it more difficult to obtain credit in the future. All prices correct at time of publication.

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