Differentiating Hire Purchase, Lease Purchase and Contract Purchase

Upon deciding between Lease vs Buy, and after going thru the different deals and monthly payments as contained in the Contract Hire Special Offers, it is now high time for you to choose the kind of finance options on your Car Leasing arrangement. There are seven finance options to choose from, these are Contract Hire, Personal Contract Hire, Personal Contract Purchase, Contract Purchase, Hire Purchase, Lease Purchase and Finance Lease.

This article will discuss and differentiate 3 of the above-mentioned Car Leasing finance options, Contract Purchase, Hire Purchase, and Lease Purchase.

Hire Purchase is an uncomplicated way of purchasing a vehicle that offers tax advantages to you. This option allows you to budget your car expenditures months in advance. This works by a customer paying an initial deposit that is calculated as a percentage of the total car cost, monthly payments are also then based on the amount of the deposit. The interest charged may be claimed as a tax relief is you are a businessman going into this deal. Moreover, the vehicle can be considered an asset, thereby allowing it to be written down against taxable income. At the end of the contract, you get to walk away with the car as your own.

Similarly, Lease Purchase is like Hire Purchase but with more elbowroom. The down payment in this option is considered and divided as monthly advance payments although cheaper than Hire Purchase. The residual amount can also be included in the monthlies thus reducing the monthly payments. The tax advantages of this option are also similar to Hire Purchase.

Alternatively, Contract Purchase offers far more flexibility than the two previously mentioned options. It allows you to enjoy the benefits of Contract Hire, like Road Fund license, maintenance expenses and a relief car without the additional VAT payments common in leases. This is beneficial for businesses and professions that are not VAT registered. It works similarly with Lease Purchase in that initial deposit is considered advance monthly payments.

Those are the similarities and differences of the 3 finance options for car leasing, hopefully this will help guide you through choosing what is best for you.