Hire Purchase vs. Leasing - Buying a Commercial Vehicle

Hire Purchase vs. Leasing - Buying a Commercial Vehicle

Leasing or hire purchase - which option is best for businesses looking to finance a vehicle? Hire purchase agreements are similar to leasing, however, the main difference is that with hire purchase you will pay any VAT applicable to the vehicle price upfront, whereas on a lease agreement, VAT is paid on your monthly lease repayments. Who owns the vehicle at the end of the agreement also differs with Hire purchase and lease agreements. With a finance lease agreement, you pay fixed monthly lease repayments and at the end of the lease term you have the option of returning the vehicle or purchasing the vehicle for a fee. Hire purchase finance also involves fixed monthly payments however at the end of the term, you are guaranteed ownership of the vehicle once the option to purchase fee has been paid.

When checking lease finance 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 leasing or hire purchase is the best option for your business.

What is a 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. 

Benefits of a vehicle hire purchase

  • 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
  • Balloon payment available in certain scenarios 

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 throughout the agreement. Typically lease agreement range from 1 - 7 year repayment terms.

Benefits of vehicle leasing 

  • Fixed monthly repayments
  • Flexible deposits 
  • Reduce monthly repayments
  • Finance any vehicle or item of equipment using a lease agreement
  • Repayment terms are available for up to 5 years – and up to 7 years under specific circumstances

Is leasing or a hire purchase better for my business?

One of the main considerations to make when assessing leasing or hire purchase agreements is how much your business can afford to pay upfront in the form of a deposit. Typically hire purchase requires the customer to pay any VAT related to the vehicle/equipment purchase upfront, whereas this is not required on a lease agreement. VAT is paid monthly on a lease agreement and therefore reduces the initial capital outlay required at the beginning of an agreement.

Summary: Get help from the professionals

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 discover the most cost-effective commercial vehicle finance agreement available to your organisation.

Here are just some of the reasons to use Millbrook for vehicle finance:

  • Competitive rates available
  • Flexible deposits and repayment terms
  • Repayment terms up to 7 years
  • £25,000 to £25 million available in finance
  • Fixed monthly repayments
  • Finance for any sector

We offer four basic funding options to businesses looking for commercial vehicles – which can all be tailored to match your specific requirements. Leasing 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.

Learn more about 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.

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