Hire Purchase is the traditional method of financing fixed assets for businesses that wish to eventually own the vehicle, machine or equipment.
The finance company buys the asset on behalf of the customer, who then pays an initial deposit.
The remaining balance, plus interest, is then paid over an agreed period, usually between two and five years. During this period, title to the goods remains with the finance company until all the payments have been made in accordance to the finance agreement.
Early settlement of the HP Agreement is usually permitted if required. Once the final payment is made, full ownership transfers to the customer.
Finance Lease: Under a finance lease, the finance company purchases and owns the asset throughout the term of the lease and hires the goods or equipment to the customer over an agreed period (primary period).
At the end of the lease the customer can either return the goods to the finance company and upgrade to new equipment on a new lease, or there is usually an option to continue leasing the goods after the primary period at an agreed annual payment.
All rental payments are subject to VAT.