Lease Finance

In our fast-paced world, owning a car has become an essential part of our lives, providing us with convenience and freedom.

However, purchasing a vehicle outright may not always be feasible or the most financially prudent option.

Lease purchase, a popular alternative that offers flexibility, affordability, and the opportunity to drive your dream car without the hefty upfront costs, is undoubtedly an option to consider.

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What is Lease Purchase?

Car lease purchase, or lease-to-own, is a financing option that allows individuals to acquire a vehicle through a combination of leasing and eventual ownership. The individual agrees to make relatively low monthly payments to use the car over a fixed period, typically between two to five years.

At the end of the agreed term, the individual can purchase the vehicle outright by paying a predetermined balloon payment or final lump sum.

The Pros of Lease finance

  • Lower initial costs: Lease purchase often requires a smaller initial deposit, making it a more affordable option for individuals who may not have substantial savings for a significant down payment.
  • Flexible repayment terms: Lease purchase agreements typically offer flexibility in terms of repayment options. You’ll be able to have a say on the duration of the agreement, monthly payment amounts, and even the final balloon payment. This flexibility allows you to tailor the agreement to your financial situation and budget.
  • Access to newer vehicles: Lease purchase allows driving a newer car model without the immediate financial burden.
  • Fixed monthly payments: With lease purchase, you understand your monthly expenses throughout the agreement, making budgeting more manageable.
  • Opportunity for ownership: The significant advantage of a lease purchase is you can own the car at the end of the agreement by settling your final balloon or lump sum payment and transitioning from being the lessee to becoming the owner.


What to look out for?

  • Mileage restrictions: Most lease purchase agreements impose mileage restrictions, which limit the number of miles you can drive annually. You may be charged additional fees if you exceed the agreed-upon mileage limit. It’s, therefore, essential to estimate your expected mileage carefully and consider any unexpected trips.
  • Financial commitment: Lease purchase agreements often involve long-term financial obligations, so it’s crucial to consider unexpected expenses or job losses. Terminating the contract early will likely incur significant penalties if your financial situation changes during the term.
  • Depreciation: Vehicles typically depreciate over time, meaning their value decreases. With a lease purchase, you may pay more in monthly payments and the final balloon payment than the vehicle’s actual depreciated value at the end of the agreement, resulting in a higher overall cost than had you purchased the car outright.
  • Maintenance responsibilities: When leasing, you are generally responsible for maintaining the vehicle during the lease-purchase agreement, including regular servicing, repairs, and keeping the car in good condition. If you fail to meet these obligations, it may result in additional charges when returning the vehicle.
  • Limited customisation: The lease purchase option often restricts vehicle modifications and customisation, requiring you to return the car in its original condition at the end of the agreement.
  • Credit report impact: Lease purchase agreements typically require a credit check, meaning any missed or late payments can negatively impact your credit score.


Which one is right for me?

Determining if the lease purchase financing option is the right choice involves considering various factors and your individual circumstances, so there isn’t a clear-cut answer.

Factors such as your financial situation, long-term plans, mileage needs and creditworthiness should all be considered to help you weigh the advantages and disadvantages of lease purchasing. We also recommend spending some time researching and comparing other car financing options and, if necessary, seek advice from trusted professionals before deciding.


The most common questions

How does Lease Purchase work?
Will I have to pay a deposit with a lease purchase?
Will I be responsible for servicing and repairs?
What happens at the end of a lease purchase agreement?
What is the difference between car leasing and car lease purchase?
Can I negotiate the terms of a car lease purchase agreement?
Are there mileage restrictions with lease purchase?
What happens if I exceed the mileage limit under a lease purchase agreement?
Can I terminate a car lease purchase agreement early?
Can I customise or modify a vehicle under a lease purchase agreement?
Is a car lease purchase suitable for individuals with poor credit?