Hire Purchase is simple and quick to put in place. It appeals to businesses of all sizes from sole traders to large fleet operators. A Typical Hire Purchase customer:
Hire Purchase provides fixed repayments and fixed interest so you can control your costs.
The deposit amount and monthly repayment can be varied to fit your budget. This allows you to use your capital or overdraft facility to invest in your in your business rather than your vehicles. It also opens up an alternative line of credit which may be useful in the future.
A possible tax bonus
As with outright purchase, a vehicle funded using Hire Purchase is deemed a fixed asset and will be accounted for as such on your balance sheet. However, ownership under Hire Purchase only passes to the purchaser at the end of the hire period, usually following the payment of the final installment to the lender.
For cars, the Inland Revenue currently permits a writing-down allowance of 25% of the purchase price of the vehicle per annum to a maximum of 3,000 on a reducing balance basis. The total allowances available over the period of ownership equates to the fall in value over this time, being the difference between original cost and final sale proceeds.
Please note all references to taxation and VAT are subject to confirmation by your professional advisors.