Lease with Purchase Option (LOA)

A lease with purchase option (LOA) is a vehicle financing contract in which a company pays regular rents to use a vehicle and, at the end of the term, chooses whether to buy it for a price fixed in advance or hand it back. LOA, from the French "location avec option d'achat", combines leasing flexibility with a path to ownership.

How a lease with purchase option works

An LOA contract runs in three stages:

• Start: the company chooses the vehicle, the term and the expected mileage. An initial payment may be requested, which lowers the following rents.
• During the term: the lessor remains the legal owner. The company pays rents, uses the vehicle and is responsible for insuring and maintaining it, as the contract specifies.
• End of term: the company either exercises the purchase option at the residual value set in the contract, or returns the vehicle. On return, the vehicle is inspected and excess mileage or damage beyond normal wear may be charged.

The residual value is the key figure: the higher it is, the lower the rents, but the more expensive it becomes to buy the vehicle at the end.

LOA versus long-term rental

The two products are often confused, yet they answer different needs. Long-term rental is a pure service: rents usually bundle maintenance, assistance and sometimes insurance, and the vehicle always goes back to the lessor. LOA is closer to financing: services are generally optional and paid separately, and ownership remains possible. In short:

• choose long-term rental for predictable all-in costs and regular renewal;
• choose LOA when you may want to keep vehicles that age well, such as utility vans with a long useful life;
• compare both on total cost of ownership, not on the monthly rent alone.

Accounting and tax treatment depend on the country and on the contract, so check with your accountant before signing. Our guide to long-term leasing and renewal covers the wider choice between financing modes.

What fleet managers should watch

An LOA fleet needs close follow-up, because most of the risk sits at the end of the contract:

• track mileage against the contract to avoid excess charges, or to adjust the contract in time;
• keep condition reports so that the return inspection holds no surprises;
• record every contract end date and decide early whether to buy or return;
• compare the residual value with the vehicle's real market value before exercising the option.

How Dadycar helps

Dadycar is a French fleet management software that keeps every financing contract under control. Contracts are stored in document management, and reminders flag end-of-term dates early enough to decide whether to buy or return. Trips and mileage, inspections and condition reports prepare the return of the vehicle, while cost allocation shows the real cost of each unit. When renewing, the leasing tenders feature helps organise requests to lessors. Data is hosted in France, with OVHcloud.

FAQ

Is LOA the same as financial leasing?
They are close. LOA is the French name for a lease with a purchase option; in many countries similar contracts are sold as finance leases or lease-purchase agreements, with local differences.

Can the purchase option be exercised before the end of the contract?
Some contracts allow early purchase, often with fees. It depends entirely on the terms agreed with the lessor.

Who pays for maintenance under an LOA?
Usually the company, unless a maintenance package has been added to the contract.