If you’re looking to invest in an expensive asset, for example,a business vehicle, then you might consider using a hire purchase scheme to do so. This is ideal for smaller businesses that can’t afford to pay for their asset outright. They can enjoy the use of the asset despite not having the capital to buy it.
How it works is that a business can approach an asset finance provider to purchase an asset on their behalf. Then, the business pays the provider to hire the asset from them.
Usually, when companies invest in an asset, it’s because it will help their business grow. Using asset finance, a company can pursue this growth without requiring vast amounts of money in the bank. The rental fee is far more financially manageable than paying for the asset upfront.
A contract is signed between the provider and the business which determines the number of payments due, the amount of each payment, and the length of the lease.
Every asset finance provider has different terms, but these contracts generally require a larger payment to begin with, followed by a series of small payments. These continue for an agreed period.
There may be a clause in the contract that allows the business to ultimately buy the asset from the finance provider. The price at this point tends to be lower since the asset is already used.
This service makes the eventual acquisition of an asset economically easier. By the time the business is offered the opportunity to purchase it from their provider, they’ve had additional time to grow their business through the use of the asset. This is why it’s considered a convenient option by many businesses.