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Hire Purchase vs Lease (what's the difference?)

If you are looking to buy a new asset, you have likely come across many different terminologies for all the ways you can get funding for your assets. Leasing or Hire Purchase could be the perfect solution if your business needs new equipment which would otherwise be unaffordable and unrealistic because of cashflow limitations.


Advantages of Hire Purchase and Lease

  • Hire purchase and Lease can be useful to businesses at any stage, from start-ups to larger well established organisations.

  • Fixed-rate funding makes budgeting easier as lessees have a clear sight of cash flow forecasts.

  • Accessible to UK SMEs who may not be able to raise funds quickly.

  • Instant access/ use of assets.

  • Allows companies to grow and expand assets without significant drain on working capital.


What is a Hire Purchase?

Hire purchase commonly abbreviated as HP, is a finance product that gives businesses assess to the assets they need, which is paid for by regular payments over an agreed period, with a fixed rate. HP can be used to fund a huge variety of assets from hard assets such as plant equipment, commercial vehicles, and manufacturing equipment Or also soft assets, such as computer software, gym equipment, AV equipment and many more. The first payment in a hire purchase will be the VAT of the asset + 10%, although it's possible to pay more initially to reduce the monthly payments. So it benefits VAT-registered companies which are able to claim tax back. You pay the initial payment, with the remainder of the balance paid over a period of time agreed on completion of the repayments. At the end of the agreement, there is usually a small fee to acquire the title of the asset but then the ownership of the assets is completely owned by your business and is transferred to you. HP is a suitable finance solution for businesses looking to purchase an asset without having to pay the full value of the asset upfront.


What is a Lease?

The biggest difference between the two is that you don't automatically own the asset outright when the set leasing period comes to an end. Typically the lease will have a set interest rate which fixes the outgoings on the asset, at the end of the agreement the lessee may have the option to buy the asset, return or alternatively, you could start a new lease agreement with a new/updated asset. Leasing allows businesses to access expensive assets required to thrive, effectively it is paid for by renting them in the form of regular payments, over an agreed period of time from a lender who owns the asset.



There are some similarities between Hire Purchase and Lease:

  • Fixed duration which is agreed upon at the outset.

  • In both agreements, you will make structured payments, either monthly, quarterly or annually, depending on the cost/size of the asset.

  • The asset belongs to the lessor however, the lessee does have sole use of the asset, in each case you are the acting owner as long as you continue with the agreed structured payments.


Ultimately you need to consider if you would like to own the asset, or if you would prefer to have the option to be able to trade your asset in at the end of the agreement If you want to find out more or if you would like an indicative quote let us know, we are happy to help. With over thirty lenders and specialist leasing companies on our broker panel, we can bring our experience to match you to the funder most suited to your needs. This way, we can always ensure that you get the best deal. For over twenty-five years, GSM Finance has helped businesses across a range of sectors to fulfil their growth aims with our individually tailored asset finance packages. Our specialised brokers will take the hassle out of your hands; finding you cost-efficient options that keep the money in your pocket, without compromising quality.


Enquire today for more information on Hire Purchase and Lease

020 8874 9994


Alternatively, please fill out a contact form and a member of our team will get back to you


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