What is Hire Purchase?
Hire Purchase Explained
Hire Purchase is a form of asset finance which can be accessed through hire purchase agreements.
Which as a result enables businesses to then purchase an asset through a series of payment instalments via an asset lender. This type of finance helps the business in maintaining its cash flow whilst at the same time avoiding the need for them to pay for the asset in full immediately.
Such agreements will see the financing company buy the equipment directly on behalf of the business before then leasing the then purchased equipment back to to the business effectively for hire. The hire agreement would be structured so that the business will then fully own the asset once the hire purchase contract term is complete, that said it’s important to note that through the contract term the business will remain responsible for the maintenance of the asset under contract.
The benefits
- It reduces the impact of an investment on the cash flow of a business by avoiding the need for having to purchase the asset outright, instead allowing business to pay the financing company for the equipment in manageable installments.
- You will often find that the interest on a hire purchase agreement is typically lower than the interest accompanying a business overdraft or a business loan.
- The combination of these two factors enables instant access to the required equipment.
- As it is the business who has ultimately classed the owner of the asset under contract, it may be, therefore, possible for them to claim capital allowances against the tax on commencement of the asset purchase agreement. (please note rules on this may change)
Is this funding route right for your business?
As a business, if you’re looking to purchase any form of asset you may wish to consider the benefits which can be offered by this funding route.
When it comes to asset purchasing and as there more than just one route to finance, we are well placed to help businesses access the right routes to finance.
Interested in Hire Purchase?

As a business, we needed newer and more reliable vehicles. Being able to obtain them through a hire purchase agreement has helped us greatly by not having to use all of available funds, plus any additional money we didn’t have.
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