Hire Purchase

Introduction

A straightfoward repayment facility where the customer ultimately owns the asset. Repayments can be structured in a flexbile way using initial payments and/or a 'balloon' (final lump sum).

Key features and benefits

• With ownership the customer has total control over the asset.

• Ownership normally carries the potential for claiming writing down allowances and/or capital gains, including any enhanced first year allowances.

• VAT on the cost of the asset is normally reclaimable.

• Fixed or variable interest rate - the customer can make their own assessment and choose accordingly.

• The interest element of repayments can normally be offset against taxable profit.

• The asset appears on balance sheet.

Typical assets: virtually all types of equipment, vehicles, plant and machinery.

Balanced Payments Plan: The best of both worlds.... the customer can opt for a variable interest rate but with fixed repayments. So that when rates fluctuate, only the number of repayments varies but the amount stays the same, thus helping the administration and budgeting. Special rules apply to company cars.

Frequently Asked Questions

What tax allowances can be claimed?

Customers can normally claim writing down allowances on the cash price of the asset as shown in the agreement. The interest element of the repayments is usually allowable against taxable profit.

Can customers reclaim VAT charged on the payments?

Providing they are registered for VAT, the customer can normally claim back the VAT payable on the purchase price of the asset. (Special rules apply to company cars).

What if the asset is lost, stolen, damaged or destroyed or becomes subject to a total loss claim during the period of the lease?

The customer is responsible for the asset and for any outstanding balance on the agreement. Comprehensive insurance, covering at least the full replacement cost of the asset is therefore vital.

Who is responsible for servicing and repair?

Unless customers have servicing and maintenance built into the agreement, they are responsible for maintaining the asset in good condition. If they fit any replacement or additional parts to the asset, they become the property of the finance company until they take ownership of the asset.

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