Hire Purchase - Suitability explanation
Hire Purchase is normally the first port of call and the most popular method for people who are looking to acquire a new vehicle. If you’re looking to take full ownership of a business vehicle, then this is likely the perfect solution. Upon completion of the contract, the title will pass to the owner who is responsible for any depreciation as well as disposal at the end of the contract.
It is also more affordable than simply buying the car outright, as you can agree to pay in instalments agreed between you and the lender. However, you cannot attempt to sell or dispose of the vehicle without the lender’s permission before finishing all the payments. Businesses will often follow this route when they intend to keep the vehicle for a long period of time or for specialist conversions. A mix between a loan and a lease, you agree with the dealer to pay a deposit of anywhere between 10% and 50% before using the monthly instalments to pay off the rest.
In essence, the lender buys the vehicle and gives you permission to use it while you make payments. Once all the payments have been made, the car belongs to you.
Hire Purchase may not be suitable for you in certain circumstances. For example:
There is no option to return the vehicle, because by entering into a Hire Purchase deal you have already agreed to buy the car via monthly instalments.
Benefits of Hire Purchase:
Vehicle is registered in the company name
It is on the balance sheet
Fixed monthly payments not subject to VAT
No mileage restriction
Taking care of the vehicle:
You must ensure the vehicle is comprehensively insured at all times
It is a condition of the manufacturer’s warranty that the vehicle is serviced and maintained in accordance with the manufacturer’s requirements. They recommended that you use the services of a main franchised dealer
Failure to make payments in full and on time may result in the contract being terminated and the vehicle repossesed. Only enter in to an agreement if you are comfortable with the financial commitment and terms.