What is Hire Purchase?

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What is Hire Purchase?

What is Hire Purchase? What are the benefits of Hire Purchase on a Van?

We speak to a number of business owners who do not understand the benefits of Hire Purchase.

Hire Purchase seems to be the 'Old Fashioned' way to finance a commercial vehicle - But why is that?

Large Deposit Required: Hire Purchase (Ownership Agreement)
Ok...On a Commercial Vehicle you have to put the FULL VAT (Value Added Tax) of the Van purchase cost as a minimum deposit. 
(*Some Finance Companies also require 10/20% of the vehicle cost in addition to the full VAT)

Great if you are VAT Registered - Not so GREAT if you are not....
If you are VAT Registered you get the VAT straight back at the end of your VAT Quarter - So in essence...NO DEPOSIT for a VAT Registered Person/Company.
If you are NOT VAT Registered - It's 20% of the vehicle cost that you cannot claim back...Or can you?

Hire Purchase is an OWNERSHIP AGREEMENT - What does that mean?
It means: At the end of the agreement - Once you have paid EVERY payment - You Own the VAN!

All yours....Simple...You don't have to Hand it back or Sell it on at the end!
There are SEVERAL Adaptations of Hire Purchase:- Lease Purchase,Contract Purchase,Etc.

However, the simplest way to know if the agreement you are being quoted for is an OWNERSHIP AGREEMENT would be as follows: YOU WILL PAY ALL OF THE VAT AS A DEPOSIT.

If your Deposit is less than the Total VAT Amount of the vehicle cost....It is NOT an Ownership Agreement.....No matter what the Salesperson Say's......It generally is a Finance Lease....Where you have to sell the Van at the end of the term. (*Not Ownership)

Your can Hire Purchase your van for ANY TERMS from 1 - 5 Years - You get a Fixed Monthly Payment for the Duration of the agreement.
(*There are Generally Finance Documentation Fee's that are either 'Spread' across the term of the Hire Purchase or Paid with the First & Last Monthly payment - Or hidden in the Rate
YOU are responsible for the Maintenance & Upkeep of the vehicle including Road Tax,Fuel & Insurance. (*Fully Comprehensive Insurance is usually a MUST HAVE)
Are there any Tax Advantages?

There are lots of TAX advantages for Hire Purchase - Annual Investment Allowance (AIA) being one of the main advantages:

A VAN is classed as 'Plant & Machinery' SO...you can offset your NEW Van 100% in 12 Months against TAX! or VANS...Up to the value of *£250,000 
This also applies to 'Out Right Purchase' - Ask your accountant.

*Please Note at time of print £250,000 Allowances - This amount is due to reduce

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