What is Business Contract Purchase? – Suitability Explanation
Business Contract Purchase provides your business with the flexibility of being able to lease a car for a fixed period of time, and at the end of the agreement, you can choose whether to buy the car, or return it to the leasing company.
The payments are calculated based on what the leasing company buys the car for at the start of the agreement, the contract duration and mileage agreed, and the expected “residual value” of the car at the end of the term. This “residual value” normally forms the basis of the final “balloon” payment, which is payable should your business wish to own the car at the end of the contract.
Business Contract Purchase – Key Benefits
Flexibility – Choose whether to purchase the car at the end of the contract, or return the car to the leasing company.
Cashflow Friendly – Business Contract Purchase requires a low initial payment of typically around 3 monthly payments, and regular payments are fixed for the duration of the lease.
Not VAT Registered? – As a type of “Purchase” agreement, the regular payments are based on the total capital cost of the car including VAT, and therefore VAT is not applicable to the monthly or final payments.
Capital Allowances – Recover “Capital Allowances” in order to offset the cost of the vehicle against your taxable profits, in order to reduce your overall tax liability.
Additional Credit Facility – avoid the need to invest capital or tie up bank credit and use Business Contract Purchase as a way of adding cars to your business.
Peace of Mind – Road Tax is included for the duration of the agreement. Service, Maintenance & Tyres may also be included for an additional amount, providing complete peace of mind.
Are there any disadvantages to Business Contract Purchase?
If you are unlikely to require the ability to purchase the car at the end of the agreement, then Business Contract Purchase may not be the most suitable type of agreement for your business.
You cannot recover VAT on payments made on a Business Contract Purchase agreement, therefore if you wish to reclaim VAT, Business Contract Hire may be more suitable.
Business Contract Purchase is a fixed-term lease agreement, and therefore if you might need to end the agreement early, you are likely to incur costs for Early Termination.
If a vehicle is provided for “Private Use” through the business, then employees and Directors will be liable for “Benefit in Kind” tax.
If you decide to return the car at the end of the agreement, you’ll need to ensure it’s in a condition based on Fair Wear & Tear standards as issued by the British Vehicle Rental and Leasing Association (BVRLA). Leasing companies may charge for damage which falls outside of BVRLA Fair Wear & Tear standards.
Lease payments are based on pre-determined mileage, which if exceeded will result in an excess mileage charge.
What else do I need to know about Business Contract Purchase?
Commercial Vehicles – Business Contract Purchase is only available on Cars and not available on Commercial Vehicles.
Personal Contract Purchase – Concept Vehicle Leasing do not offer “Personal Contract Purchase” (PCP) type agreements.
Financial Obligations – Business Contract Purchase is a fixed term agreement, so ensure you will be able to afford the repayments for the duration of the lease before you agree to go ahead.
Credit Approval – Your business will need to be approved for credit with one of our lenders before a lease can go ahead. Speak with your Account Manager if you are unsure of the requirements for securing credit for your business.
Taking a Lease Car Abroad – It’s possible to take a lease car abroad, but you will need permission from the leasing company before you go, so contact us in advance for further advice.
Private Number Plates – It’s possible to fit a private number plate to a lease car, but you must ensure it’s removed in plenty of time of return of the car to avoid losing the plate at the end of the contract.
Hire and Reward – The lenders we work with will not permit cars to be used for minicab services, and there are exceptions for usage for courtesy cars or driving schools.
For further information or advice on Business Contract Purchase, contact Concept Vehicle Leasing on 0800 043 2050 and the team will be happy to help.