Search for:

Commercial Hire Purchase

The Commercial Hire Purchase agreement is simply a contract where the lender (the ‘owner’) allows you (the ‘hirer’) the right to possess and use an item of equipment in return for regular payments. When the final payment of the hire purchase is made, the title to the goods is transferred to you.

Your business gains the use of equipment or other items of your choice in exchange for regular payments over an agreed period of time for the hire purchase (terms ranging from 1 to 5 years). When you make the final payment, the equipment is yours. However, only the interest component of these payments is usually tax deductible in hire purchase.

Who can benefit from a commercial hire purchase?

Businesses wishing to finance the purchase of trucks, industrial plant and equipment, earthmoving equipment, business and professional equipment and motor vehicles can benefit form a hire purchase.

Hire purchase key features

• Repayment schedules are flexible.
• An Offer to Hire can be arranged with no deposit or an amount that suits you.
• Balloon payments at the end of the hire purchase can be arranged.
• We own the goods until the final payment is made, at which point you gain automatic ownership.
• The interest component of the rental and depreciation on the equipment are tax deductible, provided it is used to produce assessable income or the expense is necessarily incurred in carrying on a business.
• You can repay the hire purchase contract before the term ends.

Hire purchase benefits

• Repayment schedules can be structured to suit your cash flow.
• You can obtain the use of goods for minimal cash outlay, so working capital is not significantly affected with a hire purchase.
• You may be able to make use of the taxation benefits of hiring.
• Flexible repayments allow for accurate capital budgeting.

Hire purchase interest rates

• The interest rate depends on the amount being financed and the security of the applicant. It is fixed throughout the term of the hire purchase loan.

Hire purchase fees and charges

• An establishment fee applies, with no applicable GST.
• A cash booklet is an additional charge
• Break costs may apply in some states

Hire purchase repayment schedules

Repayments can be made

• Fortnightly
• Monthly
• Yearly
• Quarterly
• Semi Annually
• Seasonal
• Irregular

Review our Comparison table of Loan Products

Below are some more Hire purchase tips

Other types of Loans

Hire Purchase Loan

Chattel Mortgage Loan

Finance Lease Loan

Novated lease Loan

Balloon Payments

Unsecured personal loan

Secured personal loan

Independent professional advice and tax advise is strongly recommend prior to entering into a personal loan. Make it a rule to contact your Financial Advisor. A Mortgage Broker can introduce you to a financial lending and leasing organisation.

Hire Purchase

The finance company holds the title of the object of the loan. The title passes back to you once the payments are made on the Hire Purchase Loan. More on hire purchase.

Chattel Mortgage

The goods are owned by you with Chattel Mortgage loan. You retain title in a Chattel Mortgage loan with the lender registered a claim to the title under a bill of sale. More on chattel mortgage.

Finance Lease

The lender rents back the good to you and you accept the risk of the residual value; i.e. disposing of the goods at the end of the Finance lease. The difference between a Hire Purchase and a Finance lease is the Hire purchase will have a lot more flexibility than a Finance Lease. Finance Lease are not used much these days. More on finance lease.

Novated Lease

As part of salary packaging you take out a lease for a car with the lender. You and your employer sign a novated agreement where the employer agrees to pay the lease out of your salary. More on a novated lease.

Balloon payments

This is a deferred payment. It is also called a reverse deposit. You pay the deposit at the end not the front of the mortgage. You borrow $20,000 you pay interest and principal on monthly basis on $15,000. The last payment you make is $5,000. The idea is that you are able to sell the goods for $5,000 and keep up to date. Be very careful of using this without advice.

Secured Personal Loan

You borrow a sum of money from a lender. The lender takes an asset as security. It may not necessary be the object you are buying for the secured personal loan.

Unsecured personal Loan

This is a loan that is made to you with no associated security attached to it. It is based on a risk assessment of the lender on your ability to repay.

Research hire purchase

From this short list there are hundreds of variations of the types of loans mentioned above. I would strongly suggest that you do more research on the loans types and the various uses of loan types.

Hire purchase tips

A tip is to not to make distinctions on subcategories of loans. Stay focused on the type of loan first.

An example of this would be: Truck Finance lease, Car Finance lease and Equipment Finance Lease. Each may have variations so it is important you understand the key elements of a Finance Loan. This will make it easier for you in looking at variations and some subtle elements of loans on offer.

Remember you are in an area of legal minefields and not always playing on a level playing field. Seek professional advice before you sign anything.