Ideal for: Businesses that run high value vehicles and want to avoid the risk of their fleets depreciating
At the Beginning of the Agreement
At the end of the agreement
- Pay the guaranteed future value in full and own the car outright. The final payment can also be refinanced subject to additional checks.
- Hand back the keys and walk away
- Trade the car in by using any existing equity (if the guaranteed future value is actually lower than the current market value of the car) as a deposit for a new finance agreement.
If the car is to be handed back but mileage has exceeded the forecast mileage agreed at the start of the contract, the business will need to pay an excess charge.
You can partially or fully settle a BCP agreement at any time, but should check the terms and conditions of the agreement as each finance company has its own procedures on how to do this.
Advantages of Business Contract Purchase
- Lower monthly payments than Hire Purchase for a comparable car and term.
- A low deposit at the start of the agreement.
- Flexibility at the end of the agreement on what you would like to do with the car.
- Fixed monthly payments throughout the term of the agreement.
Things to remember
- BCPs could work out more expensive overall than a Hire Purchase agreement for an equivalent car, especially if the business decides to enter into a second finance agreement to pay the deferred future value of the car at the end of the initial agreement.
- Most business finance agreements are ‘unregulated’ which means the same protections are not available for businesses as they are for consumers.
- Businesses should be careful about how they estimate their annual mileage as they’ll be charged for each additional mile over and above their allowance.
- When the car is returned it has to be in good condition as any damage over and above ‘fair wear and tear’ will be chargeable.
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