07 Aug Why isn’t the “offer to purchase” clearly written in the contract?
There is nothing in an Operating Lease (Rental) contract that states the customer will be able to purchase the goods for a pre-determined amount at the end of the contract.
So what’s stopping the banks from screwing customers over at the end of the Rental contract?
Nothing really. But their reputation will be on the line.
Then why don’t they put it in the contract? Because legally they’re forced to.
There are a variety of different finance types. The main difference between all of them is how you claim tax on them.
Now I won’t go into detail about how each of them work, as that would constitute financial advice.
What I will say is that a Rental cannot have a predetermined “offer to purchase” set out in the contract.
If it did it would be considered a completely different finance agreement, specifically a Commercial Hire Purchase (CHP).
A CHP is treated differently in regards to tax compared to a Rental. So having the offer to purchase listed in the contract defeats the purpose of getting the Rental in the firm place.
So what? That still doesn’t protect me?
This obviously won’t put everyone’s minds at ease because it still provides no protection for the end customer.
It is common industry protocol for a financier to grant purchase at whatever the company policy was at the time of settlement.
If they went back on their word, “A Current Affair” would come knocking.
Again, still not enough for some people. That’s why we provide another product. The Chattel. A product where you own the goods from the onset. It doesn’t make any difference to you as a supplier, just tell the client to tick a different box on the application form.
I got a confirmation from the other guy.
There are some (very few) financiers who will issue a letter, confirming the offer to purchase but more often than not this isn’t the case.
Most of the time it’s written by a broker. If it is, it’s not worth the paper it’s written on. They don’t own the equipment so they have no say in what the asset will sell for.