Hire Purchase
Hire purchase allows your business to buy an asset by spreading the cost over a fixed period of time with regular monthly instalments.
Last updated: 06/01/2025
Hire Purchase for UK Businesses
Hire Purchase agreements offer businesses a practical way to acquire essential business assets without significant upfront costs. Instead of a large initial capital outlay, businesses pay an initial deposit followed by regular installments, ultimately leading to ownership of the asset.
Choosing Hire Purchase can provide a clear path to asset ownership with the benefit of fixed monthly. MAF Finance Group can help your business in securing the right agreement, guiding you through the options and ensuring a smooth process from start to finish.
What is Hire Purchase?
A Hire Purchase (HP) agreement allows a business to acquire machinery by making monthly finance payments over an agreed period, with the option to own the machinery outright at the end of the contract. It's essentially a form of asset finance where the business uses the machinery while paying it off. At the end of the agreement, the business has the option to purchase the machinery for a final payment.
Hire purchase is a popular form of asset finance that preserves business capital and provides business owners with an asset at the end of the agreement.
When you pay for the asset you’re buying using hire purchase there’s normally a deposit to be paid and the VAT is paid upfront – unless you take advantage of a 3-month VAT deferral.
When securing finance for assets such as cars, construction equipment and agriculture machinery under hire purchase, there’s usually a requirement for the VAT to be paid upfront. While it’s fully recoverable for VAT-registered businesses, this initial payment of VAT can put additional pressure on cash flow for businesses.
We can offer an option to defer the VAT for up to 3 months from the date of the finance agreement, giving you additional time to pay.
Remember, when opting for hire purchase, your business will own the item at the end of the agreement.
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How does hire purchase work?
Hire purchase agreements must be taken out through a finance facility like a broker, bank or building society, or sometimes directly through the owner, like a car dealership.
In some cases, a hire purchase agreement will include a final payment to confirm the transfer of ownership. The payment period for larger hire purchase agreements typically ranges between 2 and 5 years, while smaller purchases may be shorter.
During the hire purchase payment period, you can use the asset as if you own it, but you cannot legally sell or dispose of an asset that you’re borrowing via hire purchase until you’ve paid for and then own it. If a business fails to make payments on time, it can run the risk of the assets being repossessed and returned to the original owner.
What are the advantages of hire purchase?
Some advantages of hire purchase agreements are:
- A useful agreement if you can’t afford to make a big payment upfront.
- Flexible payments are an option to reduce your monthly payments by paying a larger deposit or a large sum at the end of the agreement.
- At the end of the contract, you will own the asset.
- You can defer the VAT for 3 months with HP.
- Fixed rate loan so interest rates tend to be low.
- A facility can be structured to suit your budgeting plans.
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Should your business choose hire purchase?
If your business needs an asset to expand but can’t afford to purchase the asset outright, then a hire purchase agreement could be the right option. Hire purchase allows you to spread the cost of the asset purchase over a longer period with fixed repayments to suit business needs.
An alternative option would be an unsecured loan which are great for businesses that don’t have any assets to put down as security.
Things to consider for hire purchase
Some things to consider when opting for using a hire purchase agreement:
Term length: Assets can be funded for up to 7 years
Useful life: Funding can be arranged over the useful life of the asset, sometimes with a balloon payment
Assets can be funded for up to 7 years
VAT: You can delay paying the VAT for 3 months through our VAT deferral option.
Seasonal business: We can structure repayments for businesses which have seasonal peaks and troughs throughout a financial year.
How to apply for hire purchase
MAF Finance Group can compare finance offerings from a wide panel of lenders to find the best option for you.
If you would like to get a quote or need further information, simply fill in the form and we will contact you. If you want to speak to someone directly you can call us on 0115 958 6872 and a member of our team will be happy to speak to you. Alternatively, email us at [email protected].
Hire Purchase FAQs
What happens at the end of a hire purchase agreement?
At the end of the hire purchase agreement, you become the rightful owner of the bus or coach asset, meaning once the asset is paid off, you have the right to sell, refinance or keep the asset for business purposes.
What is the minimum deposit requirement?
The minimum deposit is typically the VAT amount only, meaning you only need to pay the VAT on the total purchase price at the start of the agreement. The remaining balance will be financed over the agreed term.
Are there any usage restrictions with a hire purchase agreement?
There may be usage restrictions in a hire purchase agreement. For example, some agreements may prohibit the sale or transfer of the asset until the asset is fully paid off. It's important to carefully review the contract to understand any limitations or conditions on how the asset can be used during the hire purchase term.
Can I end a hire purchase agreement early?
You can end a hire purchase agreement early, but this may involve paying off the remaining balance of the loan, including any outstanding interest or fees. Depending on the terms stated in the agreement, there may be an early settlement fee or charge for paying off the loan before the agreed term.
Can I finance used assets through hire purchase?
You can finance used assets through hire purchase, provided the asset meets the lender's criteria. Typically, the asset must be in good condition and have a reasonable expected lifespan. The terms for used assets may be different from those for new ones, with factors such as age and condition influencing the approval process, therefore checking with the lender to ensure the asset qualifies for financing is advised.
What are the maintenance costs in a hire purchase agreement?
With hire purchasing, the maintenance costs are typically the responsibility of the buyer, as they own the asset at the end of the agreement. This means you will need to cover any ongoing maintenance, repairs, or servicing required during the agreement. However, some agreements may offer optional service packages or include maintenance with the financing, so clarifying the agreement terms is advised.
What other financial solutions are available to me?
At MAF Finance Group, we have access to a panel of lenders who can provide finance for products such as asset finance, asset refinance, hire purchase, invoice finance and unsecured business loan. If you would like to explore all our finance offerings, click here.
Benefits of using a finance broker?
Whilst banks can offer different rates, they often reject certain types of purchase and have strict lending criteria. MAF Finance Group has access to a panel of specialist lenders with a variety of options and rates that are not available to customers who go direct. We can also explore the whole lending market, saving you time and effort whilst giving you competitive rates and a greater chance of acceptance.
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