Hire Purchase
Hire Purchase is the most widely and traditional form of finance options. Historically it goes back to 1850's and was cleverly designed by bankers and money lenders to flout the Money Lending Laws of that time. Instead of just lending someone an amount, they would "hire" them the goods and then let them purchase them at the end on payment of the "option to purchase" fee.
Vat is normally required to be paid as a deposit where applicable, in addition to any further part exchange money or cash that is offered or requested to be paid. The balance funded is normally repaid over 2 to 5 years (although 7-10 year repayments are available on some higher value, long life assets) and on payment of the final payment which would include the option to purchase fee, the goods become the property of the hirer.
Goods are capitalised on the balance sheet and the HP debt also appears on the balance sheet as a libility.
The standard HP agreement uses a fixed rate interest calculation, for non-regulated business, variable rates and balanced payment deals are available - these are particularly attractive when base rates are low with large potential savings against fixed rate business.
