What is Business Hire Purchase?

Business Hire Purchase is a popular way for businesses to acquire vehicles, whether for  day-to-day operations or long-term investment. This financing method allows you to spread  the cost of a vehicle over an agreed term while giving your business the option to own the  vehicle at the end of the agreement.

Here’s how it works:

1. Initial Deposit: Typically, a deposit of 10-30% of the vehicle’s value is required upfront, depending on the terms of the agreement. We can cater to 0 deposit vehicle dependant.
2. Fixed Monthly Payments: You make regular monthly payments over a period that generally ranges from 2 to 5 years. These payments remain fixed for the entire term,  making budgeting easier for your business.
3. Option to Purchase: At the end of the agreement, you have option to pay the ‘option  to purchase fee’ which is agreed at the start of the term (typically £10.00) and take ownership of the vehicle. This is a flexible arrangement that gives you control over  your asset at the end of the financing term.

What Are the Benefits of Business Hire Purchase?

1. Improved Cash Flow: BHP allows you to preserve working capital by spreading the cost of the vehicle over  time. Fixed monthly payments make it easier to budget, avoiding a large upfront  outlay and improving cash flow, which is crucial for businesses to manage their  operations.
2. Ownership: Unlike other forms of vehicle financing, like PCP car finance, Business Hire Purchase  leads to ownership of the vehicle at the end of the term. Once the final payment is  made, the vehicle belongs to your business, providing a long-term investment in your  company’s fleet.
3. Flexibility: With BHP, you have the freedom to select newer, higher-spec vehicles, like the Mercedes E-class finance. Repayment terms are flexible, with the possibility of early  repayment options, giving you more control over your finances.
4. Tax Advantages: Business Hire Purchase can offer significant tax benefits. You may be eligible for  Corporation Tax relief through Capital Allowances, allowing your business to deduct  the cost of the vehicle over its useful life. Additionally, interest paid on monthly  repayments can be claimed, and VAT on the vehicle may be reclaimable, subject to  normal VAT rules. 
5. Accessibility: BHP is often easier to obtain than traditional loans, making it an attractive option for  businesses with less-than-perfect credit. It provides a straightforward path to  acquiring the vehicles your business needs without the stringent requirements that  might come with other financing methods. 
6. Asset on the Balance Sheet: The vehicle financed through BHP is recorded as an asset on your company’s  balance sheet, allowing for depreciation over time. This can potentially reduce  taxable profits, providing further financial advantages.

FAQs

What is Business Hire Purchase?

Business Hire Purchase is a type of asset finance that allows companies to spread the cost of a vehicle or equipment over a fixed term, with ownership transferring to the business once all payments are made.

Who owns the vehicle during a Business Hire Purchase agreement?

The finance company owns the vehicle during the term of the agreement, but the business becomes the legal owner once the final payment is made.

Are there tax benefits to using Hire Purchase for business?

Yes, businesses can often claim capital allowances and offset interest charges against taxable profits, making Hire Purchase a tax-efficient way to acquire assets.