Ultimate ownership. Fixed costs. Full control.
Hire Purchase (HP) allows your business to acquire essential assets while spreading the cost over an agreed term. Once all payments are made, your business takes full ownership of the asset.
Key benefits
- Eventual ownership of the asset
- Fixed monthly payments for accurate budgeting
- Can claim capital allowances and writing down allowances
- Interest payments may be tax deductible
- Terms typically from 12 to 84 months
Who is it for?
Businesses that want to eventually own the asset, have the cash flow to handle the VAT upfront, and want certainty over future monthly outgoings.
How it works
You pay an initial deposit (and usually all the VAT upfront). The remaining balance, plus interest, is divided into equal monthly instalments. A nominal Option to Purchase fee is paid at the end to transfer legal title.
Frequently asked questions
Do I own the asset immediately?
You have use of the asset from day one but legal title transfers to you only after the final Option to Purchase payment.
Can I claim capital allowances on hire purchase?
Yes. Unlike a finance lease or operating lease, HP is treated as a purchase for tax purposes, so you can claim writing down allowances on the asset.
What happens if I want to settle early?
Almost all HP agreements allow early settlement. You'll receive a rebate of unaccrued interest under the Rule of 78 or actuarial method, depending on the lender.