Business Hire Purchase

You assume risk

Business Hire Purchase is popular with:

Smaller companies running fewer than 10 cars. The traditional method for smaller companies who are used to dealing with retail sector. Funds are provided by a dedicated finance house. The hire purchase repayment profile is typically an initial deposit of 10-20% followed by equal monthly instalments to repay capital cost of vehicle plus funding.

Advantages of Business Hire Purchase

• Cashflow: payment by instalments.
• Writing down allowances apply.
• Hire purchase is an alternative funding line to bank overdrafts
• Attracts fixed rate interest.
• Others same as Outright Purchase.

Disadvantages of Business Hire Purchase

• Inflexible: difficult to escape the outstanding settlement if say, a vehicle is no longer required.
• High deposit compared to contract hire.
• Business hire purchase appears as a debt on the balance sheet which could inhibit future borrowing.
• More expensive than contract hire
• Burden of controlling and running fleet.

Summary

Hire Purchase traditional option which is losing ground because it does not have any significant advantages, while contract hire is becoming more popular.