Business Contract PurchaseA flexible finance option, with the option to purchase for a pre-agreed amount
Business Contract Purchase involves renting a car or van for a set period of time and, at the end of this contract term, there’s an option to purchase the vehicle outright or simply walk away. With low deposits and the ability to add on optional extras such as fixed price servicing and maintenance, this form of vehicle finance can prove to be more cost effective than traditional Hire Purchase. There is also a personal car finance option known as Personal Contract Purchase (PCP).
- Better cash flow, thanks to low deposits and fixed monthly rentals
- Less risk, because the finance company is solely responsible for correctly predicting the vehciles future value
- More flexibility, with the decision to purchase the vehicle, or walk away, being made at the end of the contract term
- Servicing and maintenance can be included in one easy to manage monthly payment
How it works:
Contract Purchase is very similar to Contract Hire, in that you pay a fixed monthly amount based on the contract term and the number miles driven (normally calculated as a yearly average).
However, unlike Contract Hire, the agreement includes the option to purchase the vehicle at the end of the contract term for a pre-agreed amount. Alternatively, you can simply hand it back and walk away.
Contract Purchase can be a good choice if you want to keep your options open without taking all the depreciation risks normally associated with buying a vehicle outright using cash reserves or Hire Purchase.