Hire purchase is a type of finance agreement used to spread the cost when purchasing assets. The buyer pays an initial deposit, followed by monthly payments over an agreed period. Once the final Option to Purchase payment has been made, the buyer owns the asset.
The lender owns the asset throughout the period of the finance agreement, but you have the right to use it. The lender may also include optional extras such as warranty, maintenance, or insurance
Monthly payments cover both the asset cost and interest, meaning the total paid will be higher than the purchase price. Hire Purchase is ideal for those who want to own an asset but prefer not to pay the full amount upfront.
There are many benefits of hire purchase for businesses including:
Taking out any commercial finance agreement such as hire purchase and should be approached with caution. Before entering into a finance agreement such as this, it is important to consider:
*If we hold a trading agreement with the original introducer, the equipment will be sold to the introducers first.
There may be a final obligation at the end of your agreement to return the equipment to the funder in full working order. This can come with an associated cost so it’s important you consider and understand the terms. All fees will be communicated to you through the terms and conditions of your agreement. It is important you make sure you agree to these before signing any finance agreement.
A Hire Purchase agreement is a type of financing that allows an organisation to acquire an asset by making regular payments over a specified period with the option to purchase the asset at the end of the agreement. Unlike a loan, the organisation does not own the asset until the final payment is made.
Assets eligible for financing through a Hire Purchase agreement vary, but they typically include equipment, vehicles, and other organisation-related assets. Approval requirements typically include the ability to make the regular payments and a good credit history.
A Hire Purchase agreement can benefit an organisation by allowing it to acquire the assets it needs without making a large upfront payment. Additionally, the regular payments are typically lower than the total cost of the asset, providing more flexibility with cash flow.
The typical repayment period for a Hire Purchase agreement ranges from 1 to 5 years, depending on the asset and the organisation's needs. The regular payments have a manageable impact on cash flow, and the ownership of the asset will improve the organisation's balance sheet.
