How does Hire Purchase work?

How Hire Purchase works

Hire Purchase is a great way to get what you need because you get to choose, use and manage the assets you need for your business over an agreed period, typically up to five years.

The regular instalments you pay as part of your agreement will cover:

The asset's depreciation
Interest on the cost of the asset

At the end of the term, you get to choose to buy the asset and own it outright.

Who is Hire Purchase for?

Hire Purchase is especially handy for:

Businesses who want to keep control of their cash flow by knowing what their investments are going to cost them over the long-term, allowing them to budget effectively
Purchasing ‘hard’ assets like vehicles, machinery, equipment and other assets with resale value

Benefits of Hire Purchase

More time to repay: By spreading the cost over the life of the asset, a benefit is that you can lower the initial up-front payment. This matters because it gives you a long-term view of the fixed monthly payments you will need to make over the term of the agreement, which – in turn- helps you with your budgeting
Seasonality: If your business – like many others – has busy times and less busy times throughout the year, your monthly repayments can be adjusted in line with your sales peaks and troughs. For example, during the lead into the festive season your sales volumes might peak, but in the month or two after New Year, they fall back
Keep control: With Hire Purchase, you're in charge. You get full use of the asset throughout the repayment period and may even claim capital allowance. Capital allowance is a type of tax relief that businesses can claim when they spend money on long-term assets for use in the business. You can deduct some or all of the value of the asset from your taxable profit
Tax efficient: Financing your asset purchase through Hire Purchase can be tax-friendly because lease payments are treated as expenses, offering potential tax benefits compared to standard loans. Although asset depreciation also provides tax benefits, the useable lifetime of the asset will vary depending on the asset and on local regulation
Reclaim VAT: If you're VAT registered, you may reclaim VAT. For details on VAT registration, visit gov.uk/vat-registration/overview

Finance is secured against the asset and/or equipment. If you're unable to keep up with your payments we may repossess the asset and/or equipment.

Products and services are subject to eligibility, status, terms and conditions and availability. All lending is subject to status and our lending criteria. The right to decline any application is reserved.

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