Lease Purchase is a secured loan where a significant part of the loan amount, called the balloon payment, is due as a lump sum at the end of the term.

Lease Purchase is suitable if you

  • Are buying an older car where PCP is not available
  • Need lower repayment amounts
  • Plan to replace the car at the end of the finance agreement

Key Features

  • A large payment amount (also called a balloon payment) is deferred to the end of the loan.
  • The monthly repayment amounts are lower than under a Hire Purchase agreement (since a large amount of the loan is deferred to the end).
  • The balloon amount is payable at the end of the finance agreement regardless of the value of the car at that time. The option under PCP of handing the car to the dealership and walking away is not available.

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Lease Purchase

With Lease Purchase the loan is secured on your car. Part of the loan, known as the balloon payment, is deferred to the end of the term. As you repay only part of the loan amount over the term, the monthly payments are lower. At the end of the agreement you must pay the deferred amount from either your own funds, selling/part-exchanging the vehicle, or using a second finance agreement.

The Benefits

  • Available for new and older cars
  • No mileage restrictions
  • Lower repayments

The Drawbacks

  • The deferred payment must be made at the end of the agreement. You do not have the choice to return the car to the lender.
  • The amount of the outstanding balloon may be higher than the actual market value of the car when the agreement ends. This means you have to pay more than the value of the car to the finance company
  • You do not own the vehicle until the final payment including interest has been made.
  • Your vehicle is at risk of repossession if you do not maintain contractual repayments.

Lease Purchase may be suitable if you:

  • Want lower monthly payments.
  • Can afford the final repayment or will refinance your car or another car at the end of the term.
  • Do not want mileage restrictions.