What is Hire Purchase?
Hire Purchase is a method of buying a vehicle over a period of 12 to 60 months. The initial payment is usually higher than most leasing options but you still pay fixed monthly payments based on the value of the vehicle, length of contract and initial payment amount. There is a final payment at the end of the contract and then ownership of the vehicle is passed to you.
Key points of Hire Purchase
- Contract lengths range from 12 to 60 months
- Allows for accurate budgeting over the term of the Agreement
- All of the VAT may be recoverable in the first year for vans, different for cars depending on use. Please ask your accountant to see if this applies to you
- Vehicle is delivered to you
- Appears on Balance Sheet
Things to consider about Hire Purchase
- Road Fund Licence is supplied only for the first year
- Interest is charged based on credit rating, vehicle value and contract length
- You will be charged fees if you wish to exit the contract early
- The initial payment and the final payment can be high