Hire purchase is a way to buy assets by paying in instalments over time. With hire purchase, you legally own the item once all the installments have been paid, but in certain agreements it will appear on your balance sheet at the start of the term.
Unlike leasing, with hire purchase your business owns the item, but that means there are a few other things you need to consider:
First, will your business need the item for the foreseeable future? If the answer is yes, hire purchase could be a good fit. But if you only need it for a short time or you’re not sure, leasing might be a less risky route to take.
Second, will the asset hold its value? Depreciating items are usually leased rather than purchased — but relating to the first point above, if your business needs it for the long term that could be less important.
Finally, you should assess whether there will be an updated version of the asset in the near future. For example, in manufacturing, having state-of-the-art equipment is a significant advantage — while having the latest model of van might not be so crucial to your business.
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Hire purchase is a way to buy assets by paying in instalments over time. With hire purchase, you legally own the item once all the installments have been paid, but in certain agreements it will appear on your balance sheet at the start of the term.
Hire purchase is a type of asset finance. It's similar to equipment leasing, but simpler (and perhaps less flexible) overall.
Rather than renting an asset, hire purchase is like making a purchase and paying in instalments, like a private customer might do for a car. Normally a 10% deposit and all the VAT is paid upfront.
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
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Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
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Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
If you need equipment finance, hire purchase isn't your only option.
You might also look into a finance lease, which is a similar long-term commitment but you won't own the item at the end of term.
On the other hand, for more flexibility, operating leases are a popular choice, because you can often get regular upgrades and maintenance included.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.