Lease Purchase is similar to that of a PCP, the difference being that you are already entered into an agreement to purchase the vehicle at the end of your contract period. Unlike PCP, you cannot return the vehicle at the end of your agreement. Furthermore, it is most commonly used by VAT registered companies, as opposed to individuals.
Similarly to a PCP agreement, the future value (residual value) of the car is deducted from the retail value of the car, and the balance must be settled via a series of fixed monthly payments. Once your monthly payments are complete, you are then committed to paying the residual value of the car to take ownership of the vehicle.
For many companies, lease purchase is ideal if they wish to retain the vehicle as an asset at the end of the lease purchase agreement. Furthermore, the vehicle can be listed as a balance sheet asset, enabling business owners to write down the value against taxable profits.
