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- Lease Purchase is essentially a Hire Purchase agreement with a final lump sum (‘balloon payment’) at the end of the agreement.
- This has the effect of leaving a percentage of the amount borrowed unpaid until the end of the agreement.
- The balloon payment is determined by the estimated market value of the asset at the end of the agreement.
Benefits
- Lower monthly payments.
- Supports cash flow by spreading the cost over several years.
- The asset is shown on your balance sheet.
- VAT can be reclaimed in full.
- The interest charges are allowable against tax.
- Tax writing down allowances are available.
- Helps with budgeting for both cash flow and growth projects