At Charles & Dean, we understand the complexities of financing specialist vehicles and the importance of finding solutions tailored to your needs. Lease Purchase is a flexible finance option for high-value, specialist, or classic cars, offering a balance between affordability and ownership. Whether you're looking to preserve cash flow or secure a unique vehicle, Lease Purchase could be the perfect fit.
Here’s everything you need to know about Lease Purchase, its benefits, drawbacks, and why using a broker like Charles & Dean makes all the difference:
What is Lease Purchase?
Lease Purchase involves an initial deposit, followed by fixed monthly payments and a final balloon payment. The balloon payment is based on the predicted residual value of the vehicle, making this finance option particularly well-suited for vehicles that hold their value, such as classic cars, modern classics, and high-end sports cars.
Unlike Personal Contract Purchase (PCP), the final balloon payment in Lease Purchase is not guaranteed. This typically allows for higher balloon values, reducing monthly payments and making Lease Purchase an appealing alternative to Hire Purchase (HP).
Benefits of Lease Purchase:
✅ Lower Monthly Payments: A higher balloon value helps reduce your monthly costs, freeing up funds for other personal or business needs.
✅ Fixed Monthly Payments: Enjoy predictable, set payments that make budgeting simple and stress-free.
✅ Drive a Higher-Specification Vehicle: Lower payments can make your dream car more accessible than you might think, enabling you to choose a superior model with enhanced features.
✅ No Mileage Restrictions: Lease Purchase offers complete flexibility without penalties for exceeding mileage limits, making it ideal for frequent drivers.
✅ Ownership at the End: At the end of the agreement, you’ll own the vehicle outright after settling the final balloon payment.
✅ Tax Advantages for Business Users: Lease Purchase agreements may provide tax benefits, such as allowances for business-related vehicle use.
Drawbacks of Lease Purchase:
❎ Higher Overall Borrowing Costs: While monthly payments are lower, the overall cost of borrowing may be higher compared to, for example, a typical PCP product due to interest on the larger balloon payment.
❎ No Guaranteed Future Value (GFV): Unlike PCP, Lease Purchase doesn’t guarantee the residual value of the car. This means you cannot return the car to the finance company to clear the remaining balance.
❎ Higher Risk of Negative Equity: Due to the higher balloon payment, there’s a greater risk of negative equity if the car’s value doesn’t meet expectations at the end of the term.
Your Options at the End of the Lease Purchase Agreement:
At the end of your Lease Purchase agreement, you have three main options:
Pay Off the Balloon: Settle the final balloon payment in full to take full ownership of the vehicle.
Refinance the Balloon: Spread the cost of the balloon payment over a new finance agreement, subject to status and approval from a lender.
Sell the Car: Use the proceeds of a vehicle sale to pay off the balloon.
Why Use Charles & Dean?
Using a broker offers unique advantages when navigating Lease Purchase agreements:
Access to Competitive Rates: Our extensive panel of lenders ensures you receive tailored, competitive rates for your specific circumstances.
Tailored Finance Solutions: We specialise in structuring agreements that align with your goals, vehicle type, and budget.
Expertise in Specialist Cars: Whether it’s a modern classic, vintage car, or racing car, we understand the market and can connect you with lenders who do too.
FAQs:
Q: What is Lease Purchase Car finance?
A: Lease Purchase, often referred to as Hire Purchase with a balloon payment, is a flexible car finance option that covers the full value of the vehicle. Instead of paying off the entire amount through monthly installments, a significant final payment (the balloon) is deferred until the end of the agreement. This structure helps keep monthly payments lower while allowing you to own the vehicle outright once the final payment is made.
Q: Can I hand the car back at the end of the agreement?
A: No, Lease Purchase does not include a hand-back option.
Q: What happens at the end of a Lease Purchase agreement?
A: You can pay off the balloon, refinance the balloon (subject to status and approval from a lender), or sell the car to cover the final payment.
Q: What vehicles qualify for Lease Purchase?
A: Lease Purchase can be used for almost any vehicle, but it’s especially suited for high-value or specialist cars with strong residual values.
Q: Can you modify a car on Lease Purchase finance?
A: Yes, modifications to a car under a Lease Purchase agreement may be possible. However, it’s essential to consult your finance provider beforehand to ensure any changes comply with the terms of your agreement. This ensures you avoid potential penalties or breaches of contract while customising your vehicle.
Q: Are there mileage restrictions with Lease Purchase agreements?
A: No. While the balloon payment is calculated based on anticipated mileage, there are no excess mileage charges like you’d find with a PCP agreement. This gives you greater flexibility in how you use your vehicle.
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