This allows firms to lease a vehicle with the view to owning it at the end of the contract. By doing so firms can gain special allowances and offset interest charges against tax, without having to fund the full cost of the vehicle immediately.
This is a popular option as because there is only a small initial outlay, businesses are able to improve their vehicles immediately while minimising the drain on capital.
There is also the option to pay less each month and at the end of the lease make a larger 'balloon payment' which is set at a level to reflect the use and anticipated mileage undertaken during the agreement.
At the end of the deal firms can choose whether to pay the lump sum and keep the vehicle, or part exchanging it, using any remaining amount towards a deposit on a replacement vehicle.