Contract purchase is a flexible purchase option that defers part of the purchase cost to the end of the agreement. It allows you to have the use of a vehicle for a fixed period of time, with a predetermined mileage at a fixed monthly cost. It is a tax efficient method for companies who are generating taxable profits and require the benefits of capital allowances to minimise their tax charge. At the end of the contract there is an option to repurchase the vehicle for an agreed price set at the start of the contract, based upon an agreed mileage, period and condition of car.
Road fund licence, maintenance and breakdown cover can be included within the monthly payment if required.
Benefits of contract purchase
- On balance sheet
- Fixed payments
- Alternative credit line / cash flow benefits
- Capital allowances available
- Finance element is VAT free
- Tax relief is available on interest and maintenance
End of contract options include
- Vehicle purchase
- Vehicle returns to lender, if appropriate sales agency fee is paid at the start of contact