hire purchase

Hire purchase

What is Hire Purchase (HP)?

Buy gradually, own eventually
the step-by-step route to asset possession

Hire Purchase is a popular asset finance solution that allows you or your business to spread the cost of acquiring a new vehicle or equipment over time. With HP, you'll make regular payments to use the asset while working towards ownership.

How Hire Purchase Works:

1. Choose Your Asset: Select the equipment your business needs.
2. Initial Payment: Make an initial payment, typically 10-20% of the asset's value.
3. Regular Instalments: Pay fixed monthly instalments over the agreed term.
4. Optional Final Payment: At the end of the term, pay a fee (often £1) to gain full ownership.

Key Features:

Terms typically range from 1 to 7 years
Fixed interest rates for predictable budgeting
Flexibility to tailor payment schedules to your cash flow

Is Hire Purchase Right for You?

Hire Purchase could be ideal if:
You want to eventually own the asset
You're looking to spread costs over time
You want to benefit from tax allowances
The asset will have a long useful life for your business

Benefits of hire purchase:

Preserve
Working Capital

Acquire essential assets without a large upfront investment, keeping your cash free for other business needs.

Path
to Ownership

Unlike leasing, HP leads to full ownership of the asset, building your business's asset base over time.

Tax
Advantages

Claim capital allowances and potentially deduct interest payments from
taxable profits.

Flexible
Terms

We can tailor the agreement length and payment structure to suit your business's needs and cash flow.

Real-World Example:

A company needs a new £100,000 piece of machinery but wants to preserve cash flow.

With a 5-year HP agreement:
Result: The company acquires essential equipment, spreads the cost over 5 years, and owns the machinery outright at the end of the term.

Ready to explore how hp could benefit your business?

Contact our expert team today for a personalised quote and to discuss your specific needs.

CONTACT US

Frequently asked questions

What is the difference between Hire Purchase and leasing?

The main difference is ownership. With Hire Purchase, you'll own the asset at the end of the agreement after paying a nominal fee. With leasing, you typically return the asset at the end of the term, though some leases offer a purchase option.

Can I claim tax benefits on a Hire Purchase agreement?

Yes. You can usually claim capital allowances on the asset, including the Annual Investment Allowance (AIA). You may also be able to deduct interest payments from your taxable profits. However, tax treatment can vary, so it's best to consult with your accountant.

How much deposit do I need for a Hire Purchase agreement?

Deposits typically range from 10% to 20% of the asset's value, but this can vary. In some cases, we may be able to arrange low or no-deposit options, depending on your business circumstances and creditworthiness.

What happens at the end of a Hire Purchase agreement?

At the end of the agreement, you'll have the option to purchase the asset for a nominal fee (often just £1). Once this is paid, you'll own the asset outright.

Can I settle a Hire Purchase agreement early?

Yes, most HP agreements allow for early settlement. You'll typically need to pay the outstanding balance plus any interest due up to that point. Some agreements may include an early settlement fee, but this should be clearly stated in your contract.

Is Hire Purchase available for both new and used assets?

Yes, Hire Purchase can be used to finance both new and used assets. However, some lenders may have restrictions on the age of used assets they're willing to finance.

How does Hire Purchase affect my company's balance sheet?

With Hire Purchase, the asset appears on your balance sheet as a fixed asset, with the outstanding finance shown as a liability. This can potentially strengthen your company's financial position.

What types of assets can be financed through Hire Purchase?

Hire Purchase can be used for a wide range of business assets, including vehicles, machinery, equipment, and even some types of software. Generally, if an asset is durable, identifiable, and has a resale value, it can likely be financed through HP.

Are maintenance and insurance included in Hire Purchase payments?

Typically, no. Unlike some leasing agreements, maintenance and insurance are usually the responsibility of the business in a Hire Purchase agreement. However, we can often arrange separate maintenance packages if desired.

Can I upgrade the asset during the Hire Purchase agreement?

While it's not always straightforward, it is sometimes possible to upgrade during the agreement. This usually involves settling the existing agreement and starting a new one for the upgraded asset. We can help you explore options if you need to upgrade before the end of your term.

Remember, while these answers provide general guidance, the specifics can vary depending on the lender and your individual circumstances. At Elite Financing, we're always happy to discuss your particular situation and find the best solution for your business needs.

Common questions

What is car finance, and how does it work?

Car finance is a method of funding the purchase of a vehicle, allowing you to spread the cost over a set period. It typically involves a lender providing the necessary funds to buy the car, and you make regular payments, often monthly, until the loan is fully repaid.

How is car finance different from buying a car outright?

When you purchase a car outright, you pay the full cost upfront. With car finance, you can acquire the vehicle without a large upfront payment, instead opting for fixed monthly installments over time. This makes it more manageable for individuals or businesses to obtain the car they need.

Can I settle my car finance agreement early if I have the means to do so?

Yes, you can settle your car finance agreement early. Early settlement allows you to pay off the remaining balance before the agreed-upon term ends. However, it's essential to contact our customer support team to discuss the process and any potential settlement fees that may apply.

What types of car finance do you offer?

We offer a range of car finance options, including Hire Purchase (HP), Personal Contract Purchase (PCP), and Lease agreements. Each option varies in terms of ownership, payment structure, and end-of-term options, allowing you to choose the one that best suits your needs.

What is the key difference between Hire Purchase (HP) and Personal Contract Purchase (PCP) plans?

The main difference between HP and PCP plans lies in vehicle ownership and end-of-term options. With HP, you make fixed monthly payments and become the car's owner at the end of the agreement. On the other hand, PCP offers lower monthly payments and provides options to either purchase the car at a predetermined price or return it to the lender at the end of the term.

Can I finance both new and used cars through your service?

Yes, we provide car finance for both new and used vehicles. Whether you're looking for a brand-new model or a reliable used car, we've got you covered.

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Elite finance are a AR of Alpha Asset Finance who is regulated by the FCA. Alpha Asset Finance is a credit broker not a lender.
We can introduce you to a number of carefully selected finance providers and may receive commission for the introduction. T&C’s may apply, 18’s and over. Representative Alpha Asset Finance is regulated by the FCA.

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