What does Hire Purchase mean?

Hire purchase involves a business acquiring new equipment, machinery or vehicles by making an initial deposit and paying or financing the VAT up front. Fixed monthly repayments are then made, the value of which is affected by whether the customer pays off the entire loan over the term or has chosen a final balloon payment. This contrasts with an equipment lease, where the VAT is spread across monthly payments. There is a final nominal option to purchase fee transferring ownership of the asset to the customer. 

Hire purchase is best suited for situations where a company definitely wants to own the item at the end of the term, often where the asset has a significant usable lifespan, a high residual value and will not need to be upgraded.  

How does Hire Purchase work?

When a business requires new equipment or vehicles, they work out what’s needed and where they want to buy it from. They then contact an account manager at Portman to discuss their finance options, monthly payments and the payment structures available to them. The most appropriate deal for the customer is secured, the deposit and repayment structure are confirmed, and a financial agreement is formally accepted.

The customer selects the asset, which the lender buys and agrees to sell to the customer on credit. The customer must usually pay the VAT upfront and a deposit. The customer then makes fixed monthly payments over an agreed period including interest. Customers will own the item outright at the end of the term once the contractual payments are made, by paying a nominal final option to purchase fee. As both a lender and a broker, either Portman or one of our panel of lenders will buy the item, which will be delivered directly to you from the supplier.