Hire Purchase is a simple and popular way of purchasing a vehicle, with worthwhile tax advantages for businesses. If ownership is a priority, this is an extremely cost effective method of borrowing. The advance is secured against the vehicle, providing cost effective alternative lines of credit to banks.
Cash Flow Benefits of Hire Purchase
With a hire purchase you pay an initial deposit, calculated as a percentage of the total cost this is followed by fixed monthly repayments; which allows you to budget monthly financial commitment precisely in advance.
Tax Implications of Hire Purchase
Business users may benefit from tax advantages on the interest charged with a hire purchase agreement. The vehicle is also classified as an asset, which allows it to be written down against taxable profits by 25% or £3000 (maximum per annum).
Who Owns The Vehicle at the End of a Hire Purchase Agreement?
At the end of the hire purchase agreement, which may be from 1 to 5 years, you become the outright owner of the vehicle.