HP - Hire Purchase

What is HP or Hire Purchase?

Hire Purchase is normally taken over 2-5 years. At the end of the Hire Purchase period the asset becomes yours.  There are tax benefits from day one.  Beware that the VAT on the whole amount is normally payable at the beginning of the agreement.   It's good for budgeting as the Hire Purchase agreement is a fixed regular payment.  If the asset is taken care off correctly it can maintain a value on the Balance Sheet.   Hire Purchase is a good method of finance for second hand assets or assets that have a longer working life.  Hire Purchase arrangements with suppliers tend to be relatively uncomplicated compared with other types of finance.

Hire purchase is the most common and "easily got" credit facility. In simple terms, you obtain the asset and agree the cost with the provider. You put down a small deposit with the finance organisation, around 10-20%, and the finance organisation then takes title direct from the supplier.

Even though you are technically not the owner of the asset during the hire purchase agreement, subject to eligibility you can still receive the writing down allowances as though you had made the purchase outright.

At ithe beginning of the agreement you would usually be required to pay a documentation (or administration, arrangement) fee of £100-250 and the full purchase VAT. Subject to eligibility, you will then recover the VAT yourself. You repay the outstanding due amount and any interest in instalments over the length of the hire purchase agreement.

When the agreement reaches as conclusion you obtain title through the payment of an 'Option to Purchase Fee'. This fee is often a token gesture to transfer title, but some finance companies do still charge a significant fee. Hire Purchase agreements can be at fixed or variable rates, and the regular commitment can be reduced by the inclusion of a balloon at the end of the HP - Hire Purchase agreement

Get a speedy quote for Hire Purchase here.