Lease with Purchase Option (LOA)

A Lease with Purchase Option (LOA), often called financial leasing, is a two-part financing product. For the duration of the contract, it functions like a rental: the company pays a monthly fee to use the vehicle. However, the key difference lies at the end of the contract.

The choice at the end of the contract

At the end of the lease term, the company has a choice:

1. Exercise the purchase option: Buy the vehicle for a price that was set at the beginning of the contract, known as the 'residual value'.
2. Return the vehicle: Simply give the vehicle back to the financing company.

What a lease-purchase does not include

Unlike a long-term rental (LLD), services like maintenance and insurance are not typically included in the monthly LOA payment and must be managed separately. LOA is essentially a flexible path to potential ownership.

Who it suits

It is well-suited for companies that want the lower monthly payments of leasing but also want the option to keep a vehicle at the end of the term if it has proven to be reliable and cost-effective.