Car Lease / Hire Purchase

A Funding Agreement where the title to the vehicle passes to the customer when all payments and fees have been made.
Agreements are often constructed with a deferred payment (Balloon) equating to the anticipated value of the vehicle at the end of the agreement and this allows both low initial and monthly payments.
The customer is responsible for depreciation, maintenance costs and all risks of ownership.

Advantages

1. Customer gains ownership of the vehicle.
2. Vehicle appears on company balance sheet.
3. Customer has equity in vehicle to pay deposit on next vehicle.
4. Customer claims writing down allowance.
5. No VAT on monthly payments.

Disadvantages

1. Higher initial outlay.
2. Higher monthly cost.
3. VAT not reclaimable.
4. Customer bears risk of depreciation of vehicle.