Financial Services

Contract Purchase What Is It? 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 It 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 It 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. Financial Services