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Contract Hire and Leasing Guide


Lease Purchase
All Vehicle Contracts Contract Hire and Leasing Guide - Lease Purchase
  • Lease Purchase (Hire Purchase)

    Hire Purchase or Lease Purchase finance agreements are the same, the difference being is that lease purchase can offer lower monthly payments by incorporating a final payment (sometimes referred to as a balloon payment); this figure is one larger payment due at the end of the lease purchase agreement.  The purpose of setting this figure is to reduce monthly payments compared to that of normal hire purchase. The agreement will either be Regulated or Unregulated under the Consumer Credit Act.

    Lower monthly payments are achieved by financing the vehicle and deferring an acceptable minimum future value or deprecation element of the vehicle as one payment payable at the end of the term. This payment is paid for from the negotiated sale of the vehicle, or you have the option to purchase the vehicle for the pre-set balloon payment, or final payment. Lease purchase final payments are not guaranteed, so in the event of there being a shortfall from the sale of the vehicle, it would be the responsibility of the customer to make good of any shortfall below the pre-set final payment. Therefore, it is important that you are comfortable with the terms and conditions of the agreement, and that any final payment (balloon payments) set are realistic to that of your planned vehicle mileage, and vehicle use from the outset.

    To make life as simple as possible, the All Vehicle Contracts website helps you choose and compare which vehicle and lease purchase or hire purchase agreement is right for you. Interactive quotation options and full vehicle comparisons,  on virtually any make, model or manufacturer, are available for you to explore and compare online.

    So why choose  Hire Purchase?
    • Hire purchase - this has always been one the most popular forms of vehicle financing and it is normally a fixed cost, fixed period loan of money that is linked (or secured) to the purchase of a vehicle. With hire purchase, you finance the balance of the vehicle, less deposit so although monthly payments are higher than that of a lease purchase or PCP, you own the full vehicle asset value at the close of the agreement. It is also easier to settle your agreement earlier, because the reducing balance outstanding would be lower than that of lease purchase or PCP with a final rental or guaranteed future value. 
    So why choose  Lease Purchase?
    • Lease purchase - vehicle financing is normally a fixed cost, fixed period loan of money that is linked (or secured) to the purchase of a vehicle. Lease purchase can be structured to offer lower monthly payments by incorporating a final payment or sometimes referred to as a balloon payment; this figure is one larger payment due at the end of the lease purchase agreement.  This can prove to be a big advantage to those working on monthly out flow budgets, and if structured correctly can also leave a cash balance in the customers favour at the close of the agreement.
    What are the options at the end of the Hire purchase agreement?
    • If your agreement is hire purchase, not lease purchase, there may be a nominal option of a purchase fee for you to gain title ownership; if applicable, this will documented on your agreement.
    What are the options at the end of the Lease Purchase agreement?
    • If you have opted for lease purchase with a final payment (or balloon payment as sometimes referred to), these are usually calculated to be below the anticipated vehicle resale value.
    • Your options are to arrange to sell or part exchange the vehicle at the close of your contract, and the figure gained over and above the final rental (balloon payment) value will be yours to put towards your next car, that may assist you in entering into an agreement for your new car without recourse to your own funds.
    • If there is loss from the sale you will be liable for the shortfall under the terms of your agreement. Purchasing the vehicle at the close of your contract for the final rental (balloon payment) may attract an option to purchase fee; if applicable, this will documented on your agreement.
    What happens if I want to end the Lease Purchase/Hire Purchase agreement?

    The agreement will either be Regulated or Unregulated under the Consumer Credit Act, and your rights are unaffected.

    Early settlement terms and conditions are detailed on the agreement, the early settlement calculations are calculated by the relevant finance company that refer to rule 78, commonly used by most finance companies.

    You may settle the agreement at any time if the balance outstanding, including any balloon payment (if relevant) paid to the lender. The lender may allow the customer a rebate of the interest remaining on the agreement. However, if the agreement is regulated under the Consumer Credit Act, the minimum amount of rebate is laid down by law.

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