Combines leasing with a final 'balloon' payment if you wish to take ownership of the vehicle.
Lease Purchase is a type of car finance that allows you to spread the cost of the car over a longer period, with lower monthly payments and a larger final payment, known as a “balloon payment”. This means that you only pay for part of the car’s value during the contract, and the rest is deferred to the end. You can then either pay the balloon payment and own the car, or refinance it with another agreement. Lease Purchase is similar to Personal Contract Purchase (PCP), but unlike PCP, you cannot return the car to the finance company at the end of the contract. You have to either pay the balloon payment or refinance it.
Lease Purchase can be a good option if you want to buy a premium or expensive car, as it can lower your monthly payments and interest rates. It can also be more flexible than PCP, as you can adjust the deposit, monthly payments, and balloon payment to suit your budget. However, you should also be aware of the risks involved with Lease Purchase, such as:
- You do not own the car until you pay the balloon payment, which can be several thousand pounds.
- You are responsible for maintaining and repairing the car during the contract, even though you do not own it.
- You may end up paying more than the car is worth if its value depreciates faster than expected.
- You may have difficulty refinancing the car if your financial situation changes or if you have negative equity (when you owe more than the car is worth).