Contract Purchase Finance Explained
This type of finance agreement is suited to companies who are wholly or partially VAT exempt. It is also suited for high value cars where the company want to own their vehicles, but don’t want the risk of depreciation.
The company pay fixed monthly instalments and can either pay a predetermined value and retain ownership at the end of the contract or hand the vehicle back. With Contract Purchase the vehicle is shown as an asset on the balance sheet and the monthly rentals are not subject to VAT.
- Flexible term and mileage – fixed instalments
- Flexibility at the end of the agreement to either purchase the car for the predetermined optional final ‘balloon’ payment or simply return the car to the finance company
- Maintenance and other added value services can be included
- Low initial outlay
- Ownership passes to the customer on completion of payments
- On-balance sheet treatment with writing down allowances for accounting purposes
- Finance Rentals not subject to VAT