Lease Purchase (Hire Purchase)
Hire Purchase or Lease Purchase finance agreements are the same, the difference being is that lease purchase can offer lower monthly payments by incorporating a final payment (sometimes referred to as a balloon payment); this figure is one larger payment due at the end of the lease purchase agreement. The purpose of setting this figure is to reduce monthly payments compared to that of normal hire purchase. The agreement will either be Regulated or Unregulated under the Consumer Credit Act.
Lower monthly payments are achieved by financing the vehicle and deferring an acceptable minimum future value or deprecation element of the vehicle as one payment payable at the end of the term. This payment is paid for from the negotiated sale of the vehicle, or you have the option to purchase the vehicle for the pre-set balloon payment, or final payment. Lease purchase final payments are not guaranteed, so in the event of there being a shortfall from the sale of the vehicle, it would be the responsibility of the customer to make good of any shortfall below the pre-set final payment. Therefore, it is important that you are comfortable with the terms and conditions of the agreement, and that any final payment (balloon payments) set are realistic to that of your planned vehicle mileage, and vehicle use from the outset.
To make life as simple as possible, the All Vehicle Contracts website helps you choose and compare which vehicle and lease purchase or hire purchase agreement is right for you. Interactive quotation options and full vehicle comparisons, on virtually any make, model or manufacturer, are available for you to explore and compare online.
The agreement will either be Regulated or Unregulated under the Consumer Credit Act, and your rights are unaffected.
Early settlement terms and conditions are detailed on the agreement, the early settlement calculations are calculated by the relevant finance company that refer to rule 78, commonly used by most finance companies.
You may settle the agreement at any time if the balance outstanding, including any balloon payment (if relevant) paid to the lender. The lender may allow the customer a rebate of the interest remaining on the agreement. However, if the agreement is regulated under the Consumer Credit Act, the minimum amount of rebate is laid down by law.
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