Hire Purchase

Our brokers are reporting that the most popular method of asset finance at the moment continues to be hire purchase. Hire purchase can be used to acquire almost any type of asset that your business may require. Hire purchase is attractive because the finance company usually only requires a relatively small deposit (in the region of 10%) as a percentage of the purchase price of the asset. In addition the asset itself is commonly used as the security for the finance provider and there is no need for personal or directors’ guarantees so it keeps things simple from the client’s perspective.

The benefit of a hire purchase agreement is that you have the use of the asset during the term of the contract without owning it (and most importantly, not paying the full purchase price upfront as a lump sum), since the finance provider retains ownership of the asset until you finally exercise the option to buy it at the end of the contract term. You then have the further benefit of no longer needing to make further payments to use the assets at the end of the contract term unlike some forms of leasing contracts where you never end up owning the asset.

Hire purchase agreements can be structured in numerous ways so they are fairly flexible. For example, some finance providers will give you options having variable interest rates or fixing the interest rate you pay to give you confidence in the exact amount you will need to repay over time. Sometimes you also have the option of structuring an agreement with lower regular payments and a final larger lump sum payment (known as a balloon payment) at the end of the term.

Under current UK tax regulations hire purchase is also tax efficient and for tax purposes the asset is treated as though it belongs to your business so you can claim 100% writing down allowances on up to £50,000 of asset value.

How does a hire purchase contract work?

The finance provider usually expects you to make a deposit followed by a number of regular payments over the contract term. The regular payments generally take place monthly. At the end of the contract term you will have paid the asset price plus interest to the finance company. You then have the option to purchase the asset or return it to the finance company. If you wish to complete the purchase of the asset then you would normally pay a nominal amount and the title to the asset formally passes to you, the purchaser.

Hire purchase agreements can be put in place for a broad range of timescales, generally up to five years.

Speed… Cash can be available within days.
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Simplicity… We keep it simple, our brokers understand the market and recommend the best solution for your unique requirements.
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Experience… Our experience makes your life easier.
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Success… We have a long track record of successfully financing assets for our clients.