A contract a customer enters to purchase an asset by way of instalments.
Typically a deposit is paid then instalments paid over a fixed period of time with ownership at the end.
Hire purchase contracts have been in existence for a very long time and traditionally used to purchase equipment such as;
- Vehicles
- Forklift Trucks
- Plant and Machinery
- Farm Machinery
Usually a deposit is paid plus the vat then the balance over fixed payment to include interest charges.
Key Features
• Spread the cost of acquiring an asset over typically 2 to 7 years by paying only an initial deposit which can typically be as low as 5% of the net asset cost plus all of the VAT.
• All of your repayments remain fixed throughout the finance term.
• Repayments can be monthly, quarterly, annual or seasonal based upon the specific requirements of the customer.
• Ownership of the asset transfers to the customer upon making the final repayment which also includes an option to purchase fee.
Key Benefits
• Low deposits preserve valuable cash resources.
• All of the costs of the finance are known at the outset to assist with budgeting and cashflow.
• If utilising a balloon to defer some of the capital to the end of the agreement you will make lower monthly repayments than for a standard HP deal.
Hire Purchase (HP)
• Hire Purchase is a well-established method of financing for companies that wish eventually to take ownership of business assets.
• 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. During this period, ownership rests with the finance company, who is effectively hiring use of the asset to the customer.
• Once the final payment is made, ownership transfers to the customer.