Can anyone please advise as we are not legal or financial experts!
My Dad has an Audi A4 Tdi on a three year lease agreement, which reaches the end of the lease period in 2 weeks time. At the start of the contract he was told he would have to sell the car and pay a "bubble payment" of £8725.
Then recently he was told it was £8725 +VAT, so the payment required would be £10250 (which he may not be able to raise by selling the car).
So he decided he would pay the bubble payment and keep the car himself, as there is nothing wrong with it, basically buying it off the lease company.
But he has spoken to them today and they have told him he cannot buy it; he has to either:
(a) sell it to a 3rd party, pay the £10250, plus pay them 2.5% of the cash raised from the sale; or
(b) pay the £10250, keep using the car, but continue paying the £300 per month installments he has been paying, and he will never own the car!!
I thought paying the bubble payment would be the end of the agreement and the car would be his to either sell or keep?
He was never made aware of the extra 2.5% in option (a), and (b) sounds ridiculous, is that legal?
He has now been advised by a friend that under the Consumer Credit Act, as he has paid more than 50% of the new value of the car in installments, he can tell them he doesnt want the car any more and give it back to them and not pay the £10250.
So with this third option, are there any other implications (legal) other than making the finance company a bit upset?!
If he does this, does he have to notify them before the lease runs out, ie. within the next 2 weeks?
Any advice much appreciated,
Rich.
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This is a case of thoroghly re reading the original agreement, as all we can do is guess.
The option to sell it on & pay the lease company 2.5% must have some other clause, or YOU could buy your dads car for £1, allowing him to pay the lease company £10250 + £1 + 2.5pennies!!
The 'hand it back' probably won't apply, here, as this is NOT a Hire Purchase sale & this is where it would normally apply.
There will be other Broomers, more familiar with leases, but you do need professional advice, from what I can see.
VB
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There is a difference between Lease and Lease Purchase
Lease Purchase equates to HP - Make 36 payments (+ a Balloon Payment sometimes)and the car/photocopier or whatever is yours.
Lease the equipment belongs to the Leasing Co who have claimed Capital Allowances on the car and charged a cost of finance on top. (They cannot claim Capital Allowances on Lease Purchase above just charge interest on top of the SP).
Legally they cannot claim Capital Allowances & sell it to the Lessee after the 24/36 mth period - but they could sell it to a 3rd Party - maybe your next door neighbour/brother-in-law.
As to whether it is £8725 or £8725 + VAT look at the original agreement - the monthly payments on the Lease would be £XXX + VAT so it is more likely that the Balloon Paymemnt is £8725 + VAT
Re the +2.5% look at the Lease Agreement - if it is in there there is nothing you can do.
You can hand the car back and walk away after the final payment is made - the Lease Company collects / you return it to them & the car is sold it at auction / traded to a dealer and the money is the Leasing Company's.
Get the Original Signed Agreement and read the T&Cs.
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Thankyou for your replies.
Ive now found out that he's found the +2.5% bit in the small print of the agreement, so that cannot be grumbled about.
As for me buying it off him for £1, I'm assuming it will have some clause about selling at market value? Can he sell it to me or my mother or would it have to be to a non-family member?
As for the whether its £8725 with or without VAT, I'm now assuming it must be +VAT because he is a sole trader and VAT registered.
You can hand the car back and walk away after the final payment is made - the Lease Company collects / you return it to them & the car is sold it at auction / traded to a dealer and the money is the Leasing Company's.
This is the option my Dad is now interested in. He would rather them just have it back than have to sell it privately within a fortnight, and give them the money. Sounds a bit dodgy now because it means him not fulfilling his side of the agreement. Can he really just do that with no financial/ legal consequences? I suppose he could write to them and say he has been unable to sell it..
I will try and read the T&C's tomorrow.
Many thanks,
Rich.
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As for the whether its £8725 with or without VAT, I'm now assuming it must be +VAT because he is a sole trader and VAT registered.
Just a thought, as I'm no expert on VAT, but if he's registered for VAT and the car has been used for his business use is the VAT part of the payment not claimable against his VAT return? Might make the sums more palatable.
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VAT can only be claimed on vehicles if they are used 100% for business use - which cars rarely are. There are all sorts of complex formulae for claiming the vat on lease payments, dependent on the original list price of the vehicle. If the car costs have been claimed through his accounts your dad should talk to his accountant about the best way forward - depite being a tax advisor I'm no expert on VAT.
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