Hire Purchase

The lessee purchases an asset by entering into a hire purchase agreement. Usually he/she will pay an agreed deposit of approximately 10% followed by an agreed number of monthly instalments.

During the term of the agreement, the lessee own the use of the asset but "full title" does not pass until the agreement is completed and all fees have been paid.

Benefits

Improved cash-flow

It allows you to spread the cost of an asset over a pre-determined period of time.

VAT

The Vat is paid and recouped in exactly the same way as if you had bought the asset for cash.

Writing down allowances

When you buy an asset via hire purchase you can claim "writing down" allowances in exactly the as way as if you had paid cash for the asset.

Security

A hire purchase agreement is independent if any other financial arrangements you or your business may have, such as a bank overdraft. Thereby preserving existing credit lines open to the business.

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