As part of our recent look into the asset finance options businesses have in the current market, we can focus in on hire purchase today as one of the options for businesses to get access to the vehicles, plant and/or machinery they need to make their money.
Hire purchase is a pretty simple form of asset finance that’s a bit like equipment leasing. And works in a similar way to when you might by an expensive new couch for your home and paying it off in regular instalments, only it’s for bigger-ticket assets for your business.
Like you would for a big shiny new couch on credit from Harvey Norman, you’ll need to pay a deposit and you’ll need to pay interest on your regular payments that pay off the balance when it comes to the hire purchase of assets like vehicles or equipment.
The deposit is usually around 10 per cent and all the GST is also paid upfront. While the assets are being repaid they are usually still owned by the provider, who are responsible for maintenance and insurance during that time.
The business will legally take over ownership once all the repayments have been made, but often the asset will appear on their balance sheet from the moment the agreement begins.
The benefits of hire purchase basically let you get your hands on crucial assets right away while spreading the cost evenly over a set period.
It can be a great option for start-ups or growing businesses that need to upgrade their equipment and that don’t have endless availability of funds or constant cash flow.
The hire purchase agreements are usually for somewhere between 12 and 60 months and they retain the same interest rate throughout, making the stress of possible rises disappear and also making budget planning easier.
If your business needs some big-ticket assets to start producing the goods and services that make it a profit, talk to Perry Finance today to see if a hire purchase arrangement can work for you, and whether you can capitalise on some of the potential tax deductions that come with a hire purchase agreement.