Networking in Berkshire - Business Event Details

Benefits of Hire Purchase and Lease Plans for Businesses

Hire purchase was originally developed in the United Kingdom, but if you are in the United States, you may know it as a “rent-to-own” plan. Hire purchase for a vehicle means that you will be paying for said vehicle or vehicles, whether it be new or used, in instalments rather than upfront. Whilst you are paying in instalments, you will have use of the vehicle, therefore you do not have to wait until all the instalments are paid off to gain access to it (source: Capital Advisory).

 

You usually pay a low deposit, at about 10% of the value, and pay off the value of the car in monthly payments and you do not own the vehicle until the value has been met. This also means that for the purposes of taxes and business expenses, it can be more complicated to claim expenses and tax reliefs on a hire purchase vehicle as you do not actually own it until you have completed on the vehicle after a number of years (source: Martin Tiano & co.)

 

For businesses, hire purchase is commonly practiced when a company does not want to make the capital outlay to purchase a vehicle. Instead of having to buy vehicles upfront and lose out of a large chunk of money, the company benefits from spreading out the payments to make it more manageable.

 

What are the Benefits?

The main benefits of hire purchase for businesses and their vehicles include:

  • Flexible repayment terms – can span from about one to five years. You can fit the monthly payment into your general budget. Keep in mind however, the longer the term the more you will end up paying in terms of interest.
  • Deposit is usually relatively low, as mentioned, around 10% of the car's price.
  • The fixed interest rates are there so that you know exactly what it is that you are paying every month for the length of the term.
  • Once you have paid off half the cost of the value of your car, you may be able to return it if it is no not needed for the purposes on your business. There is thus no obligation for a company to keep a vehicle and have to sell it when it is no longer wanted
  • The payment does not have to be made up front meaning that the company can obtain an expensive car without the capital.
  • Some hire purchase plans also include maintenance as part of the contract, therefore the company does not have to worry about paying out for any repairs that may be a burden and expensive.
  • You have a wide choice of vehicle. If you are needing a van, you can get this. If you need multiple cars, this is also an option for you.
  • Since all the paperwork and admin is done by the leasee, so the company can solely focus on their on business.
  • With hire purchasing and leasing, the company do not have to worry about the risk of your valuable assets depreciating and the cost and hassle of handling maintenance is all managed by the leasing company.

 

Clearly, if you are a business, it may be wise to consider hire purchasing and leasing to gain a vehicle when weighing up the benefits. 

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