Hire purchase (HP) and finance leasing agreements share some of the same benefits, but there are some important differences too, which is why we offer both options as an FCA Appointed Representative.
Ownership. With HP, the business becomes the owner of the asset once all the payments are completed. In a finance lease, the ownership of the asset remains with the lessor (finance company) throughout the lease term.
Payment structure. A finance lease is typically spread over a shorter term than hire purchase, with the business making regular lease payments over a fixed term, covering the use of the asset. With HP, a downpayment is often made followed by regular payments. The total cost of the asset, including interest, is divided into these instalments.
Maintenance and repair. With HP IT finance, the responsibility for maintenance and repair usually sits with the business, as they are considered the eventual owners. With finance leasing, it’s possible to have maintenance and support services built into the lease agreement.
Flexibility. Finance leasing gives businesses the option to upgrade or replace the asset at the end of the lease term, making it easier to adapt to technology changes.
Accounting treatment. The asset is not recorded as a capital purchase with a finance lease. However, with HP, it is and is recorded as such on the company balance sheet.