Is Leasing Or Hire Purchase Better for My Business?
Hire purchase agreements are similar to leasing, however, the main difference is who owns the item that’s part of the finance arrangement. With a leasing contract, you only pay for the depreciation of the vehicle’s value throughout the agreement and at the end of the contract, you won’t own the vehicle. Hire purchase finance involves fixed monthly payments with the option to pay a purchase fee for the vehicle at the end of the contract.
When checking lease purchase vs hire purchase, deciding on the best option depends on your requirements. Commercial vehicles unlock new opportunities for businesses. However, to secure a return on your investment you need the right finance agreement. Keep reading to discover whether lease purchase vs hire purchase is the best option for your business.
What Is Hire Purchase?
Hire purchase agreements are also known as instalment plans. It is a contract where you pay an initial instalment and then repay the balance of the asset through fixed monthly payments, as well as the interest throughout the agreement. If you wish to own the vehicle, once the agreement concludes, you can pay a purchase fee typically around £150.
At the end of the hire purchase agreement, as well as purchasing the vehicle you can part-exchange it for a newer model.
- Fixed monthly payments
- Secured against the value of the vehicle
- Own the vehicle once the agreement ends
- You choose the deposit and repayment terms
- No mileage restrictions
What Is Leasing?
A lease is a legal agreement in that you, the lessee, agree to pay the owner, the lessor, of the vehicle for its use. While property or equipment can be paid for as part of leasing, the most common items to lease are vehicles. Leasing requires fixed monthly repayments and a final ‘balloon payment’ that is payable through a secondary finance agreement.
- Fixed monthly repayments
- Flexible deposits
- Reduce monthly fees with tailored balloon payments available
- Finance any vehicle using a lease-purchase agreement
- Repayment terms are available for up to 5 years – and up to 7 years under specific circumstances
Hire Purchase or Leasing – Which Is Right For Me?
One of the main considerations to make when assessing lease purchase vs hire purchase agreements is how much your business can afford to pay each month. The payments for hire purchase agreements cover the entire cost of a vehicle, which means the fees required are typically higher than when leasing the same vehicle.
With hire purchase agreements, you also need to account for potential interest rate fluctuations. As the repayment terms are shorter than leasing, typically up to 1 year, the interest charges will be higher initially. However, the interest rate will depend on your credit score like most other types of finance.
Leasing lets you spread the cost of the finance agreement over a longer term. You also don’t have to commit to purchasing or part-exchanging the vehicle once the agreement concludes. However, instead of a purchase fee, leasing requires you to pay a balloon payment to cover the remaining debt owed to the vehicle’s owners, which is often more than the final fee as part of a hire purchase agreement.
Another consideration is the amount of mileage you’re expecting to drive in the vehicle each year. When working out this number, make sure you add on an extra 1000 miles to cover any unexpected journeys. Whichever agreement you choose, ensure that it has enough mileage for your requirements.
Get Help From The Professionals
- Competitive Rates Available
- Flexible deposits and repayment terms available
- Repayment Terms Up To 7 Years
- £5000 to £10 million Available In Finance
- Fixed Monthly Repayments
- Finance For Any Sector
If you’re looking to finance a commercial vehicle, finding the right deal doesn’t have to be a challenge. Working with business finance professionals lets you gain access to untapped potential deals that could secure you a high ROI. At Millbrook Business Finance, our team of experts can help you to discover the most cost-effective commercial vehicle finance agreement available to your organisation.
We offer four basic funding options to businesses looking for commercial vehicles – which can all be tailored to match your specific requirements. Lease purchase or hire purchase agreements are ideal if your business intends to purchase the vehicle and wants to spread the cost out to assist cash flow. To explore our other options, get in touch with our expert team today.
Millbrook Business Finance
At Millbrook Business Finance, we are finance experts who can source the right commercial vehicle finance agreement for your requirements from our portfolio of lenders. With access to the lowest interest rates in the UK, Millbrook can help you spread the cost of a vehicle over a repayment period and secure a high ROI.
Call us on 0333 015 3301 or visit our contact page to enquire further.