Contract Purchase is similar to Contract Hire in the fact that you pay a deposit and continue to pay for the vehicle in monthly instalments, it differs as a product by offering your organisation an option to keep or return a vehicle at the end of its contract. If you decide to keep the vehicle your organisation has the option to purchase the vehicle at a pre-determined price (known as a “balloon payment”).
- Contract purchase monthly instalments are not subject to VAT.
- You can include the vehicles on your balance sheet as an asset.
- The vehicle value can be written down against taxable profits.