Hire purchase is a way of paying for an asset, such as machinery or a vehicle, in regular instalments over time. The business uses the asset straight away but only becomes the legal owner once the final payment is made.
How it compares
With a lease, you typically never own the asset. With a loan, you borrow money and buy the asset outright yourself. Hire purchase sits in between: you build towards ownership while spreading the cost.
Things to weigh up
Because the finance is tied to a specific asset, the asset usually acts as security until you have paid in full. Read the agreement carefully to understand what happens if payments are missed.
- Ownership transfers at the end of the term.
- The asset itself is normally the security.
- It is one of several ways to fund equipment.
Credicorp Flex and Slice are flexible business facilities rather than asset-specific hire purchase. We can help you understand which approach suits a particular purchase.
See also: What is a guarantor in business lending?, What is insolvency?, What is gearing?.