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- Car Finance Glossary
- Lease Purchase
Lease Purchase
This finance option is similar to hire purchase offering a flexible deposit, flexible repayment periods, and a flexible percentage of the purchase price can be deferred to the end of the agreement (where it differs from a hire purchase). Because part of the price is deferred to the end, the monthly payments are lower than a hire purchase agreement. This can help the company's cashflow whilst getting the same tax and financial benefits as it would from a hire purchase agreement.
The initial deposit is normally paid as monthly payments in advance, thus making cashflow management easier.
At the end of the finance term, there are two options:
- Pay the balloon payment (residual value) as a final lump sum to get ownership of the vehicle
- Part exchange the vehicle and upgrade for a new one.