Vehicle Contract Purchase (available to business users)
Is very similar to Vehicle Hire Purchase, with the added flexibility of a Guaranteed Future Value (this is the minimum value that the finance company estimate that the vehicle will be worth at the end of the term, subject to fair wear and tear). The Guaranteed Future Value is usually set at a fairly conservative level and would have an agreed maximum mileage amount. At the end of the term there are various options:
* Pay the sum equal to the Guaranteed Future Value and become the owner of the vehicle.
* Refinance the vehicle for the remaining sum
* Part Exchange the vehicle and the dealer taking the vehicle in part exchange will settle the sum outstanding to the finance company and if there is a surplus amount over and above the Guaranteed Future Value, use this as a contribution to the new vehicle, or for any other use.
* Sell the vehicle and keep 100% of the sale proceeds over and above the Guaranteed Future Value
* If the market value of the vehicle is less than the Guaranteed future value you can simply hand the vehicle back (subject to the vehicle being of average condition for it’s year and mileage) to the finance company at the end of the term (the funder will normally contact you three months prior to the end of the contract, to establish which route you wish to take) without any further commitment or liability.
Personal Contract Purchase
Personal Contract purchase is designed for individuals rather than companies and is very similar to Vehicle Hire Purchase, with the added flexibility of a Guaranteed Future Value (this is the minimum value that the finance company estimate that the vehicle will be worth at the end of the term, subject to fair wear and tear).
Personal Contract purchase is designed for individuals rather than companies and can be of particular interest to those opting out of a company car scheme, or who are in receipt of a car allowance. It is very similar to Vehicle Hire Purchase, with the added flexibility of a Guaranteed Future Value (this the minimum that finance company estimates that the vehicle will be worth at the end of the term). The Guaranteed Future Value is usually set fairly conservatively by the finance company and would have an agreed maximum mileage amount. The effect of having a Guaranteed Future Value is to reduce monthly payments. At the end of the term there are various options:
* Pay a sum equal to the Guaranteed Future Value and become the owner of the vehicle.
* Refinance the vehicle for the remaining sum
* Sell the vehicle and keep 100% of the sale proceeds over and above the Guaranteed Future Value.
* Part Exchange the vehicle and the dealer taking the vehicle in part exchange will settle the sum outstanding to the finance company and if there is a surplus amount over and above the Guaranteed Future Value, use this as a contribution to the new vehicle, or for any other use.
* If the market value of the vehicle is less than the Guaranteed future value you can simply hand the vehicle back (subject to the vehicle being of average condition for it’s year and mileage) to the finance company at the end of the term (the funder will normally contact you three months prior to the end of the contract, to establish which route you wish to take), without any further commitment or liability.
Vehicle Lease Purchase.
Lease Purchase is really the same as Vehicle Hire Purchase except that it allows you to have what is called a balloon payment at the end of the term. What this means is that at the end of the agreement there is a sum (the balloon payment) still outstanding.
This is normally set (taking into account future residual value tables) at a figure that the finance company believes to be a realistic estimate, of the value of the vehicle at the end of the term. It is of course better to underestimate rather than overestimate the future value.
It is important to note that at the end of the term the balloon payment must be paid, regardless of the value of the vehicle; even if the balloon payment appears conservative at commencement there is always the risk that the value of the vehicle may be lower than the balloon payment, that is due at the end of the term. For those
who may be concerned about this, an alternative would be to increase the monthly payments and reduce the final balloon payment.
If you have any queries or questions with regard to Vehicle Contract Purchase, Personal Contract Purchase, Lease Purchase or any other form of vehicle finance, please do not hesitate to contact us. Bowater Price plc 01494 536 536.
