Funding Methods - Lease Purchase

Disadvantages:

Ø The business must be in a healthy shape at the end of the vehicle's fleet life to pay the balloon, which may exceed the vehicle's residual value.

Ø Exposure: the fleet may become vulnerable to residual value decreases and exceptional maintenance costs. You will need high calibre expertise to manage this method of acquisition effectively.

Ø Budgeting: it is difficult to provide robust forecasts with this level of risk.

Ø VAT not recoverable unless 100% business use.