Contract Purchase Guide
Unlike Contract Hire, Contract Purchase gives you the option to buy the vehicle at the end of the agreement at a pre-agreed figure the it set out initially.
This is a more flexible method of leasing as you don’t have to decide what you wish to do with your vehicle until the end of the contracts. Hand it back, extend the contract or buy it – the choice is yours.
Contract Purchase | Explained
Contract Purchase is a finance agreement that gives you lower monthly payments than traditional Hire Purchase, where you pay off the full capital balance. The agreement will either be Regulated or Unregulated under the Consumer Credit Act.
Affordable payments are made possible by the way in which this agreement is calculated. The vehicle is finance and the predicted minimum future value is deferred until the end of the term. This is based on the deprecation element of the vehicle and can be referred to as a Guaranteed Minimum Future Value (GMFV), balloon payment or option to purchase figure.
How does Contract Purchase work?
Affordable, fixed cost motoring can be tailored to suit your budget and miles per annum, resulting in more straightforward budgeting.
Acquiring a new vehicle via Contract Purchase often works as being far more cost effective than financing older, more dated vehicles. You can take advantage of latest new vehicle technology, reducing fuel and still saving by keeping your monthly payments as low as possible.
You could be surprised at the savings you can make and could be driving a new car for a lot less than you think with Egon Car Leasing!
Contract Purchase| Frequently Asked Questions FAQ’s
Q. What is the usual Contract Purchase contract term and initial down payment?
A. Contract Purchase Plans are usually fixed between 24-48 months; short period contracts are not available.
Initial payments can be without any deposit contribution or they can be tailored to meet with a deposit to suit your requirements. The higher the initial payment is, the lower the monthly payment will be. It really can be your call (subject to acceptance)!
Documentation fees charged by the finance company are usually payable by Direct Debit when signing or they are sometimes collected at the same time as your initial payment; all of the information is detailed on the final documentation.
Q. What options do I have at the end of a Contract Purchase agreement?
A. As we briefly touched upon at the start of our Contract Purchase Guide, you have different options that are available to you at the end of your contract term.
You can arrange to sell or part exchange your vehicle to meet the GMFV – any monies achieved that are over the end amount payable to the finance company are yours to keep and perhaps put towards your next car.
You can also choose to purchase the vehicle at the end of your contract for the Guaranteed Minimum Future Value – this may attract an option to purchase fee (this will already be detailed on your agreement). The option is still open to you to re-finance at this stage if you wish!
The end value is always a conservative estimation, set to be below the anticipated vehicle resale value from the outset. This is guaranteed as part of your Contract Purchase agreement which means you will know the very least amount that your vehicle will be worth at a point in the future.
Q. What happens if I choose to return my Contract Purchase vehicle over the agreed mileage?
A. If you terminate the agreement over your agreed mileage allowance, an excess mileage charge will apply as per your agreement with the funder at the outset. This is charged at pence per mile.
With Contract Purchase, you also have the flexibility to choose to purchase the vehicle if you wish to as an alternative at the GMFV.
If you settle the agreement early, mileage is calculated pro-rata and if you are under the mileage allowance, no refund is given.
Q. What are the rules about terminating a Contract Purchase early?
A. You can settle a Contract Purchase agreement any time and settle the balance is outstanding, including the GMFV payable to the lender and/or other related costs that will be detailed in your agreement.
Some lenders allow clients a rebate of any interest remaining on the agreement but if the agreement is regulated under the Consumer Credit Act 1974, the minimum rebate is set out according to the law.
Q. How does Egon Car Leasing protect data?
Your information is used to help us provide you with information about our services and keep our records up to date.
You can request a copy of personal information we hold about you and we will not disclose your personal information outside Egon Limited without your permission. However, we may supply information to Police forces and central government if required to do so, in full compliance with the Data Protection Act.
Contract Purchase from Egon Car Leasing
Quote online today, click here to contact us or call us on 01952 290 949 to discuss your vehicle Contract Purchase requirements. We look forward to hearing from you soon and welcoming you as another valued customer!