Lease Purchase
A fixed rate agreement is much the same as Hire Purchase, but with a couple of differences:
- The deposit is mostly referred to as a number of months on signing 1, 3 or 6 or more plus the VAT
- A lump sum often referred to as a Residual Value or Balloon can be built into the deal, this gives you
- A lower monthly repayment because you are not making capital repayments on the sum. You would however be paying interest on the deferred amount.
- The balloon will become due at the expiry of the primary period either through cash flow or sale proceeds
A deferred sum can be of benefit enabling you to purchase an item paying for the depreciation value as long as you get the future market value right! As ever take advice, our advice is to keep the balloon as low as possible to reduce the charges on the same and try to cover the future payment from future value otherwise you will be looking to cover any shortfall from cash flow.
Our approach with advice may cost us the odd deal, in not giving the customer what he thinks he wants but once we have a customer its rare that we lose them!