Find out more about Hire Purchase
Available to all clients
Hire purchase is an agreement which offers a fixed cost, fixed repayment and is secured against the asset being bought. It is the most traditional funding method of spreading the cost of buying a car or most other assets. In certain circumstances the monthly repayment can be lowered by including a deferred capital payment (a Balloon Payment).
This facility delivers all the benefits of ownership without the inital capital outlay. Payments, made up of capital and fixed interest, are repaid by monthly, quarterly, half-yearly, or annual payments.
The finance company allows the customer to use the asset or car for an agreed period of time, subject to the receipt of agreed repayments.
When all the repayments have been made you will be given the option to gain outright ownership. You do this by paying a nominal ‘Option to Purchase’ fee, transferring ownership (title) of the car or other asset to you. However, this is completely optional.
Info For Business Users
You claim capital allowances allowing charging against profit. The first £50,000 of capital expenditure, excluding cars, qualifies for 100% capital allowance deduction. Expenditure over £50,000 attracts Writing Down Allowance (WDA) at the current appropriate rate. See guide here.
The actual cost of the asset is capitalised in the balance sheet and an annual charge for depreciation is shown in the accounts as an expense in the profit and loss account. This therefore has the effect of showing the asset in the balance sheet at cost, reduced by the cumulative charge for depreciation.
Business clients can also utilise an HP Balanced Payments Option. This is an HP deal with fixed repayments and interest element calculated on a variable bank base rate cost. When base rate fluctuates only the number of repayments varies with the amount payable each month remaining the same. This helps your administration and budgeting.
