|
|
       |
  |
|
Lease
Purchase A
lease purchase is a conditional sale agreement where the customer agrees
to purchase the vehicle in return for making a number of fixed payments.
A typical Lease purchase agreement has a low deposit (Normally
equivalent to three monthly payments) followed by a number of fixed
monthly payments, over 24 to 48 months, with a final balloon payment
equivalent to, or less than, the expected future value of the vehicle.
The purpose of the balloon payment is to make the monthly cost lower and
therefore to make a higher value vehicle more affordable.
The
vehicle is registered in the customers name and they are taking the full
risk of depreciation and disposal of the vehicle. Customers who want a
protected future value for their vehicle should consider ‘Contract
Purchase’ for business or ‘Personal Contract Purchase’ for a private
individual.
Key
Benefits:
Corporation
tax and Income Tax.
When
a business purchases a vehicle under a lease purchase arrangement they
are entitled to claim Capital Allowances. The amount of the capital
allowances claimable for each vehicle is restricted to £3000 per annum
except in the year of disposal when a balancing allowance is claimable.
Example:
If
a vehicle was purchased for £20,000 and sold 3 years later for £10,000
the timing of the Capital allowances would be:
Year 1
£3000 The
total amount that the vehicle has depreciated during its ownership is
allowed against profits for taxation although the timing of the tax
relief is waited towards the last year of ownership.
The
interest element of the Lease purchase payments is wholly allowable
against tax.
|
 |
