Hire Purchase (HP) is a well-established method of financing the purchase of assets by businesses. Under an HP agreement the customer will pay an initial deposit, with the remainder of the balance and interest paid over a period of time.
The finance company which provides finance is known as the "creditor". It will purchase the asset on behalf of the customer, who is known as the "hirer". The finance company owns the asset until the final instalment is paid for the asset.
Benefits of Hire Purchase:
- The assets can be used immediately whilst allowing repayments to be staggered, giving companies a better cash flow.
- HP agreements are easily negotiated and available.
- The most up to date technology can be hired and used to increase company productivity and efficiency.
- The hirer can recover the writing down costs and VAT on the assets.
- There is a clearly defined financial commitment from the outset.
- Security is on the transaction that has been financed thus requiring no additional commitment from the customer.
- HP is not repayable on demand unless the customer defaults on the agreement.
Hire Purchase
© 2010 Brunel Asset Finance Ltd All Rights Reserved
