Lease Purchase

Lease Purchase Explained: The "I'll Definitely Buy It Later" Option 

So you've got your eye on a new car, but you're not keen on emptying your bank account in one go?  

If you're nodding along, lease purchase might be worth a look. It's like saying "I definitely want to own this car eventually, but I'd rather spread out the payments in a clever way."  

Let me walk you through how it works in plain English. 

What is Lease Purchase? 

It is a type of agreement where you become the owner at the end. You pay a deposit (you pick how much), followed by monthly payments (usually over 2-4 years), before paying a final payment at the end. Violia, the car is now yours. 

Very similar to PCP, but where you get the option of paying the final payment on a PCP, with a Lease Purchase, it is mandatory.  

How It Actually Works in Real Life 

Let's say you're eyeing up a £30,000 car (which is not much these days!). Here's how lease purchase would typically play out: 

1. Pick your car – New or pre-reg 

2. Put down a deposit - This is flexible, but let's say £3,000 

3. Agree on your contract length - Usually 2-4 years  

4. Set your balloon payment - This is the lump sum at the end, maybe £12,000 in this example 

5. Make your monthly payments - You'd pay off the remaining £15,000 over 36 months (about £417 per month) 

6. Make the final balloon payment - Hand over that £12,000, and the car's all yours! 

The monthly payments are lower than traditional finance because you're not paying off the entire value during the contract - you're pushing some of it to that final payment. 

The crucial thing to understand is that unlike some other finance options, there's no "thanks, but no thanks" option at the end. That balloon payment isn't optional - you've already agreed to buy the car. 

How Does It Compare to Other Ways to Get a Car? 

Car finance can be proper confusing. Let me break down how lease purchase stacks up against the other options. 

Lease Purchase vs. PCP 

PCP (Personal Contract Purchase) looks similar on paper - lower monthly payments with a balloon payment at the end. But here's the key difference: with PCP, that final payment is optional. Don't want the car anymore? Just hand it back and walk away. 

With lease purchase, you don't have that flexibility - you're committed to buying it. On the plus side, lease purchase sometimes comes with slightly lower monthly payments than PCP. 

Lease Purchase vs. Hire Purchase 

With hire purchase, you're spreading the entire cost of the car across your monthly payments. No balloon payment at the end, but your monthly payments are higher. 

Lease purchase gives you lower monthly outgoings but requires that discipline to save for the final payment. 

Lease Purchase vs. Leasing 

Regular leasing (Personal Contract Hire) is more like a long-term rental - you never own the car. You just hand it back at the end and maybe get another one. 

Pretty much everyone here loves having a new car every three years or can't be bothered with surprise repair costs (life is to short to have to pay out to replace a cam belt) - so we all lease.  

With lease purchase, you're working towards ownership, which means the car is yours to keep, modify, or sell after that final payment. 

The Good Stuff About Lease Purchase 

Lighter on Your Monthly Budget 

The big appeal is those lower monthly payments compared to traditional car loans. It can be the difference between driving a basic model and treating yourself to a few nice extras or even a more premium brand. 

You'll Actually Own It 

Unlike leasing where you're essentially renting long-term, you'll eventually own this car outright. That means you can keep it as long as you want, modify it without worrying about lease terms, or sell it whenever you choose. 

Business Benefits Too 

If you're getting the car through your business, there might be some tax advantages worth exploring. Worth chatting to your accountant about this one! 

The Not-So-Great Bits 

That Balloon Payment Isn't Optional 

This is the biggie - you need to have a solid plan for that final payment. It's not like PCP where you can just hand back the keys if you can't afford it or don't want the car anymore. 

That said, you could just refinance it or get a loan to pay for it – if you don't have the cash ready, of course.  

Stuck If Your Situation Changes 

If your circumstances change during the agreement - maybe you need a bigger car for a growing family or your commute situation changes - you're still on the hook. Getting out early usually means paying off the remaining balance plus that balloon payment (you could sell it and pay the difference). 

The Depreciation Factor 

Since you're definitely buying the car, its future value becomes your concern. If the car's value drops faster than expected, you might end up with negative equity (owing more than it's worth) when you make that final payment. 

Who's Lease Purchase Perfect For? 

From my experience chatting with customers who've gone down this route, lease purchase tends to work best for: 

• People who definitely want to own their car long-term but want more manageable monthly payments 

• Those who are disciplined with saving and can plan ahead for that final payment 

• Business users looking for certain tax advantages (chat to your accountant!) 

• Drivers who keep their cars for many years after paying them off, getting value from that ownership 

One of our customers, Sarah T, is the perfect example. She knew she wanted to keep her car for at least 8-10 years, so lease purchase made sense. She paid slightly lower monthly amounts for three years, made the balloon payment (which she'd been saving for), and has now enjoyed three years of payment-free driving (until we tempt her with a new deal 😉). 

Is Lease Purchase Your Cup of Tea? 

Ask yourself these questions: 

• Are you comfortable committing to buying this specific car several years from now? 

• Can you realistically save up for that balloon payment alongside your monthly payments? 

• Do you prefer lower monthly payments now, even if it means a large payment later? 

• Are you planning to keep the car for a good while after you've paid it off? 

If you answered yes to these questions, lease purchase could be a good fit for you. 

If you're more of a "I might change my mind" person, or you're not confident about saving for that balloon payment, PCP gives you more flexibility, while hire purchase might be simpler if you just want to spread the whole cost evenly. 

Still scratching your head? I get it - car finance isn't exactly light bedtime reading! Drop us a line and we can chat through your specific situation with no pressure or jargon. Sometimes a quick conversation can clear things up better than pages of information.