Leasing & hire purchase (asset finance)

Leasing and hire purchase

Leasing and hire purchase are types of finance used by businesses to obtain a wide range of assets – everything from office equipment to vehicles.

Leasing and hire purchase could be the perfect solution if you need new equipment which would otherwise be unaffordable because of cash-flow constraints.

Because leases and hire-purchase agreements are secured wholly or largely on the asset being financed, the need for additional collateral is much reduced. There is more security for the user because the finance cannot be recalled during the life of the agreement, provided the business keeps up with payments.

Leasing

A leasing company buys and owns the equipment, which the business then rents for a predetermined period. The business also has the option to replace or update the equipment at the end of the lease period. Typically, the lease will have a set interest rate, which fixes the outgoings on that asset.

Hire purchase

If a business wants to own the equipment at the end of the agreement, but avoid the cash flow impact of buying outright, then hire purchase is an option. A finance company buys the equipment and the business repays the cash price plus interest through regular repayments. These agreements are also normally at fixed interest rates. At the end of the agreement there is usually a nominal fee to acquire title to the equipment.

Leasing and hire purchase are available directly from specialist providers, or indirectly through equipment suppliers or finance brokers.

If you seek advice on leasing and hire purchase click here.

Finance and Leasing Association

Most of the firms providing asset finance in the UK are members of the Finance & Leasing Association (FLA) and all their agreements would be subject to the stringent standards set out in the FLA’s Business Code of Conduct.

Together on the journey

Access to the right kind of finance at every stage in your growth journey enables businesses like yours to invest, grow and create jobs. That’s why the British Business Bank and ICAEW’s Corporate Finance Faculty, and partner organisations representing finance and business, have created the business finance guide. Find out more about our partners