What is Hire Purchase?
Hire purchase enables businesses to purchase new assets, without compromising cash flow by staging the payments over a longer period. By paying a hire purchase company through a series of instalments, you avoid the need to buy the asset outright and reduce the impact of the investment on your business.
Although you’ll be responsible for the asset’s maintenance throughout the duration of the hire purchase contract, the fixed monthly payments help with budgeting and, at the end of the agreement, your company will have the option to buy the asset.
A variation on this product is lease purchase, which works in the same way except the residual value (an estimated future value of the asset at the end of the contract, based on its depreciation) is offset until the end of the agreement. This helps to reduce the repayments, and also ensures you own the asset outright at the end of the contract.