Vehicle Leasing Home >> Fleet Management >> Vehicle Funding >> Contract Purchase
Contract Purchase Information
What Is Contract Purchase?
Contract Purchase offers the facility to purchase vehicles over a predetermined period of time and at fixed monthly costs, without taking the depreciation risks normally associated with ownership.
How Does Contract Purchase Work?
The monthly payment takes into consideration the cost of the car,
anticipated depreciation and mileage, as well as any service and maintenance
options you wish to include.
At the end of the contract, ownership can be retained by making a
final balloon payment. Alternatively the vehicle can be returned for
resale by the funder, with no further payments due.
How Is Contract Purchase Accounted For?
The vehicle appears as a balance sheet asset for the duration of
the contract, meaning that you can claim capital allowances at the
rate of 25% per year on the reducing asset value of the vehicle (up
to a maximum of £3000 per annum). However, unlike Contract Hire
VAT is not recoverable on the monthly payments.
For vehicles over £12,000 a balancing charge or allowance is
made on disposal of the vehicle, thus generating tax efficiencies
by allowing for the full depreciation amount.
