Finance Products
Lease Purchase
Lease Purchase offers a unique solution that combines the flexibility of leasing with owning your vehicle at the end of the agreement. Here’s an in-depth look at how Lease Purchase works.
What is Lease Purchase?
Lease Purchase occupies a distinct position in the vehicle finance landscape, combining the lower monthly payments of a lease arrangement with a firm commitment to ownership at the end of the agreement.
It is a conditional sale agreement: you make regular monthly payments throughout the term, and at the end, a deferred sum, the balloon payment, falls due. Once paid, the vehicle is yours outright.
Unlike Personal Contract Purchase, where handing the vehicle back is a genuine end-of-term option, Lease Purchase is designed from the outset with ownership as the outcome. The balloon payment is not optional; it is the mechanism by which ownership transfers.
How Does Lease Purchase Work?
A Lease Purchase agreement consists of three stages:
- Deposit: You’ll typically pay an upfront deposit, often around 10% of the vehicle’s value, though it varies by lender and vehicle. A larger deposit can reduce your monthly payments by lowering the amount being financed.
- Monthly Payments: You’ll make fixed monthly payments throughout the agreed term. These payments cover the use of the vehicle throughout the term.
- Balloon Payment (Deferred Sum): At the end of the agreement, the deferred sum – calculated at the outset based on the vehicle’s projected value at the end of the term – falls due. Payment of this sum completes the ownership transfer.
The balloon payment under Lease Purchase is a committed obligation, not a choice. Clients considering this arrangement should plan for it from the moment the agreement is signed.
End-of-Term Options
While Lease Purchase commits you to paying the balloon payment, there are options available at the end of the term for those who need them:
- Refinance: If paying the balloon sum in full is difficult, it may be possible to refinance the sum, spreading it across a new agreement and converting it into manageable monthly payments.
- Sell the Vehicle: If your circumstances have changed and you no longer wish to keep the vehicle, you may sell it. Any equity above the outstanidng balloon figure is yours to retain.
The Benefits of Lease Purchase
Considerations of Lease Purchase
To explore Lease Purchase options through our panel of lenders, apply now or speak with the Premier Specialist Solutions team.