Hire purchase

Taking out a hire purchase (HP) agreement arranged by Luna Finance can allow your business to spread the purchase cost of an asset over time, rather than making one bulk payment.

What is hire purchase?

For the duration of a Hire Purchase (HP) finance agreement, you will be hiring the asset from your lender. When you have made your final payment you will then have the option to purchase the asset or return it to the lender.

If you choose to purchase the asset when the contract is complete, there will be a fee in order to do so. This amount is usually a nominal fee that does not reflect the market value of the goods (unlike a residual value). You can either choose to pay this amount in full or through a secondary rental agreement. This is where you take out a further loan on the asset in order to pay off the final lump sum owed.

Lease purchase

A lease purchase is a hire purchase agreement but a residual value is offset until the contract ends. This is an estimated value of how much the asset will be worth when the contract is complete. Applying a residual value can help to reduce your monthly loan repayments.

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How it can work for your business

We tailor each finance agreement so that it suits your business situation, affordability and cash flow. This includes your deposit amount, finance period, monthly repayments and final outlay.

Hire purchase is a suitable finance route if your business is interested in owning the asset but doesn’t have the funds to pay for it immediately. It’s a good option for high-value assets that are likely to have a resale value over time, including; agricultural, construction and manufacturing equipment or machinery.

Benefits of hire purchase

  • Flexible repayment time – Able to spread the cost over the assets lifetime
  • Post-contract options – Either purchase the asset when the contract is complete or return to the lender
  • High-value asset – Full use of products that your business might not be able to afford if paying in full
  • Tailored finance – Agreement is designed to your business requirements, cash flow and budgets
  • Tax advantages – For VAT registered companies