As we help with asset finance, we thought it was only right that we share some posts explaining what some of the finance options are available on the market. In this post we’re talking about hire purchase.
What is Hire Purchase?
Hire purchase is where the finance company will purchase the asset for the business to use and the business will then make monthly payments for a set time. Once the final payment has been made the business can choose to purchase the asset for a fee.
How does it work?
It’s very straightforward. Once you have chosen the equipment you want to purchase you would put down a deposit and then pay monthly installments for the agreed time period. These usually include interest. At the end of the term you have the option to buy the asset outright.
Advantages
• Hire purchase is a flexible and straightforward finance option
• It’s an accessible option, especially if you don’t have the capital to make a large payment upfront
• At the end of the term you can choose to buy the asset
• You are officially the owner of the asset for tax reasons
• The interest rate is fixed for the duration of the agreement which is helpful for budgeting and won’t change if Bank of England increase the base rate
Disadvantages
• You will only own the asset at the end of the agreed period which means you can’t sell or modify the asset until then
• If you don’t keep up the repayments, your lender can take the asset away and your credit rating will be affected
• The duration of most hire purchase agreements is between 3 to 5 years which can be a long time for a smaller purchase
If you are looking for asset finance and would like to discuss your options, get in touch with Dorsia Finance – info@dorsiafinance.co.uk | 01522 420 420. We are based in Lincoln but work nationwide.
