Commercial hire purchase lets a business spread the cost of an asset over a fixed term and own it outright at the end. The funder buys the asset, your business pays a deposit and then fixed monthly instalments, and legal title passes to you with the final payment.
Bolton Business Finance is an independent asset finance broker. We arrange commercial hire purchase on vans, cars, plant, machinery and equipment, from £5,000 to £10 million, across a panel of around 25 asset finance lenders drawn from a wider panel of more than 135 UK funders. We do not charge a broker fee on asset finance. We are paid a commission by the lender that provides the facility.
Written by Marcus Wright, owner and founder of Bolton Business Finance Ltd, in financial services since 2008 and a commercial finance broker since 2019. Last reviewed September 2026.
The short version
- Commercial hire purchase is a way of buying a business asset in instalments rather than paying for it outright.
- The funder holds legal title during the term. Your business holds and uses the asset from day one.
- Ownership passes to your business with the final payment, sometimes on payment of a small option to purchase fee.
- VAT is normally payable in full on the asset price at the start, not spread across the payments.
- Because the business is treated as the buyer, capital allowances are generally available on the asset.
- Terms run from 12 to 84 months. Nil deposit and balloon payment structures are available.
- We arrange hire purchase for business purposes only. We do not arrange consumer or regulated agreements.
On this page
What is commercial hire purchase
Commercial hire purchase is an asset finance agreement under which a funder buys an asset chosen by your business and hires it to you, with ownership transferring to your business once all the payments have been made. It is also written as business hire purchase, commercial HP or simply HP.
The sequence is the same on almost every deal. You identify the asset and agree a price with the supplier. The funder pays the supplier. Your business pays a deposit, then a fixed monthly instalment across the term, then a final payment that may include an option to purchase fee. At that point legal title moves from the funder to your business.
The asset itself is the lender’s security. That is why hire purchase is often available to businesses that could not raise the same figure on an unsecured business loan, and why lenders can look past a credit history that would stop an unsecured application.
Hire purchase is the most commonly used of the four asset finance structures because it matches how most businesses think about equipment. If you intend to still be using the machine in eight years, paying for it over five and owning it at the end is usually the structure that makes sense.
Business use only
We arrange non-regulated commercial hire purchase for limited companies, limited liability partnerships and other business borrowers where the agreement sits outside the consumer credit regime. Bolton Business Finance Ltd is not authorised by the Financial Conduct Authority.
We do not arrange consumer hire purchase, personal car finance, PCP or any regulated agreement. Hire purchase to a sole trader or a small partnership can fall inside the consumer credit regime depending on the amount borrowed and the purpose of the agreement. Where it does, we are not able to act, and we will tell you that at the first conversation rather than at the end of an application.
How a hire purchase agreement is structured
Six variables decide what a hire purchase agreement looks like: the asset, the term, the deposit, whether there is a balloon, how VAT is handled and what security the lender takes beyond the asset itself.
| Item | Detail |
|---|---|
| Facility size | £5,000 to £10 million |
| Term | 12 to 84 months, normally matched to the working life of the asset |
| Deposit | Nil deposit available. A deposit reduces the monthly cost and widens the range of lenders willing to look at the case |
| Balloon payment | Available. Common on vehicles and plant with a predictable resale value |
| VAT | Normally payable in full on the asset price at the start. Some lenders will fund the VAT element separately |
| Ownership during the term | The funder holds legal title. Your business has full use of the asset |
| Ownership at the end | Passes to your business on the final payment, sometimes on payment of an option to purchase fee |
| Security | The asset. Directors are commonly asked for a personal guarantee, particularly on smaller or newer businesses |
| Speed | Credit decision often inside 24 to 48 hours, payout to the supplier typically 2 to 5 working days |
| Best suited to | Assets the business intends to keep and use for the long term |
Hire purchase or a finance lease
The real decision on most deals is between hire purchase and a finance lease. Both spread the cost of the asset. They differ on who ends up owning it, when the VAT is paid, and how the asset is treated in your accounts.
| Point of difference | Hire purchase | Finance lease |
|---|---|---|
| Owner during the term | The funder | The funder |
| Ownership at the end | Passes to your business | The funder keeps title. The asset is usually sold at the end or rentals continue at a reduced rate |
| VAT | Normally due in full on the asset price at the start | Charged on each rental, so it is spread across the term |
| Initial outlay | Higher, because of the VAT position and any deposit | Lower, often one or three rentals in advance |
| Capital allowances | Generally available to your business, as it is treated as the buyer | The funder owns the asset. Rentals are usually treated as a business expense instead |
| Residual value risk | Sits with your business, since you keep the asset | Shared, depending on how the end of term is structured |
| Best suited to | Assets you intend to keep, and businesses that can absorb the VAT up front | Spreading the full cost including VAT, and soft assets you may not want to keep |
The third option is an operating lease, where the funder carries the residual value risk, maintenance is often included and the asset is handed back at the end. That suits equipment which dates quickly or needs replacing on a cycle. It is not a route to ownership, so it rarely competes directly with hire purchase.
If the asset is one your business already owns, the structure you want is asset refinance rather than hire purchase. That raises cash against the asset and can include a sale and hire purchase back, where title moves to the funder and returns to you once the facility is repaid.
VAT and tax treatment of hire purchase
VAT is the single biggest practical difference between hire purchase and a lease, and it is the point that catches most businesses out. On hire purchase the VAT on the asset price is normally payable in full at the start rather than spread across the instalments. On a £60,000 machine that is £12,000 due at outset on top of any deposit.
A VAT registered business will usually recover that amount on its next return, so the issue is cash flow timing rather than cost. Where the timing does not work, some lenders will fund the VAT element as a separate short facility repaid over three or six months. Tell us at the quote stage if that is likely to matter and we will approach the lenders that offer it.
On capital allowances, the general position is that because your business is treated as the buyer of the asset, the allowances sit with your business rather than the funder, and the interest element of the payments is treated separately from the capital. The treatment that applies to your business depends on the asset, your accounting period and the reliefs available to you. That is a question for your accountant, and it is worth settling before you commit to a structure rather than after.
Balloon payments on hire purchase
A balloon is a larger final payment at the end of the agreement. Because a portion of the capital is parked in that final payment, the monthly instalments across the term are lower.
The arithmetic is straightforward. Take a £60,000 excavator on a five year agreement with no deposit. Ignoring interest, the capital alone repays at £1,000 a month. Put a £12,000 balloon on the end and the monthly capital drops to £800, with £12,000 falling due in month 60.
A balloon works where the asset will still be worth more than the balloon figure when it falls due, because you then have real choices: settle it from cash, refinance it, or sell the asset and clear it from the proceeds. Hard assets with an established resale market, such as plant, HGVs and agricultural machinery, are where balloons belong.
A balloon is a trap on soft assets. Putting one on IT equipment, shop fit-out or gym equipment lowers the monthly figure for five years and then leaves a payment due on something with little or no resale value behind it. Lenders will rarely offer a balloon on those assets, and where one is offered it is worth asking why.
What you can fund on commercial hire purchase
Almost any identifiable business asset, new or used. Hire purchase is used across the full range of hard and soft assets set out on our asset finance page, with the widest lender choice on hard assets that hold their value.
- Excavators, dumpers, telehandlers and site plant
- HGVs, tractor units, trailers and vans
- CNC machines, lathes, presses and machine tools
- Tractors, combines and agricultural machinery
- Forklifts, cranes and materials handling
- Printing presses and packaging lines
- Coaches, minibuses and taxis
- Commercial kitchen and catering equipment
Three points are specific to hire purchase and worth knowing before you start looking:
- Used assets are fundable. Age matters more than condition on paper, because the lender is looking at what the asset would fetch if it had to be sold. Most funders will look at equipment up to ten years old at the start of the agreement, and further on plant with a long working life.
- You can source the asset yourself. You are not tied to a dealer’s own finance, and you do not have to buy from a dealer at all.
- Private sales can be funded, which dealer finance cannot do. Fewer lenders operate here and most will want an inspection or a valuation, so build a few extra days into the timetable.
What hire purchase costs and how to compare quotes
Asset finance is very commonly quoted as a flat rate, and a flat rate is not what it appears to be. It is charged on the full amount borrowed for the whole term, even though the balance is falling every month. As a rough illustration, a flat rate over a five year term works out at close to double the equivalent rate on a reducing balance. A quote at a flat 6% is not a 6% facility.
This is why two quotes showing the same monthly payment can differ substantially in what they actually cost. Before comparing anything, get all of the following from each lender:
- The total amount payable across the agreement, not the monthly figure
- Whether the rate quoted is flat or on a reducing balance
- The documentation or facility fee, and when it is charged
- The option to purchase fee at the end, which is often quoted separately or not at all
- The deposit and whether it includes the VAT
- The balloon, if any, and what falls due in the final month
Put your own numbers through it
Our asset finance calculator prices hire purchase against a finance lease and an operating lease. Enter the asset cost, the deposit, the term and the rate and it returns the monthly payment, the total cost and the true annual rate, which is the figure a flat rate quote hides.
It also compares financing against paying cash after tax relief. That comparison can reverse the answer. Where the asset qualifies for full relief in year one, owning it tends to win. Where it only attracts a writing down allowance, leasing usually does.
Hire purchase with adverse credit or as a new business
Hire purchase is one of the more reachable products for a business with an imperfect credit history, because the lender holds security in something it could recover and sell. A CCJ, a default or a period of late filing does not rule you out on its own.
What lenders look at is what the adverse actually is, how old it is, whether it has been satisfied, whether the directors will give a personal guarantee, whether a deposit can be put in, and how readily the asset could be resold. A three year old telehandler with a £10,000 deposit behind it is a very different case to a soft asset with nothing down.
Newly formed companies can be considered too, usually where a director has relevant sector experience and is willing to support the facility with a guarantee, a deposit, or both. We will tell you whether a case is placeable before you spend time on a full application.
Early settlement and what happens if payments are missed
You can settle a commercial hire purchase agreement early. Ask the funder for a settlement figure, which will be the outstanding capital plus some proportion of the remaining interest, and in many cases a settlement or early termination fee. Because these are non-regulated business agreements, the statutory rebate rules that apply to consumer credit do not apply, so how much of the future interest is rebated is a matter of the contract you signed. Check that clause before you sign, not when you want out.
If payments are missed, the position is different from an unsecured loan in one important respect. The funder still owns the asset. It has not passed to your business and will not until the agreement is completed, so the lender can move to recover the asset itself rather than pursue the debt alone. Personal guarantees given by directors sit behind that.
In practice most funders would rather restructure than repossess. Rescheduling the remaining term, taking a payment holiday or refinancing the balance are all things lenders will discuss, and they discuss them far more willingly before a payment is missed than after. If cash flow is tightening, speak to the funder early, and tell us as well. We can often approach the lender on your behalf or look at whether invoice finance would relieve the underlying pressure.
How to arrange commercial hire purchase
- Tell us about the asset, what it costs, whether the price includes VAT, and whether it is new, used or a private sale
- We approach the lenders whose criteria fit, rather than sending one application to one funder and waiting
- Indicative terms come back the same or next working day, showing the monthly payment, the total payable and every fee
- Credit decision, often inside 24 to 48 hours on a complete application
- Documents issued and signed electronically, then payout to the supplier, typically 2 to 5 working days from a complete application
It takes longer where the asset is unusual, where it is being bought privately and needs an inspection or valuation, or on larger facilities that require full financial information. We will tell you which of those applies at the quote stage.
To get a quote we need what the asset is, the price and whether it includes VAT, your company name and registration number, any deposit or balloon you want, and last filed accounts or recent management figures on larger facilities. At the smaller end that is often all it takes. If you do not have the supplier invoice yet, we can still give you indicative terms to take to them.
Commercial hire purchase FAQ
What is commercial hire purchase?
Commercial hire purchase is an asset finance agreement under which a funder buys an asset chosen by your business and hires it to you over a fixed term. Your business pays a deposit and then fixed monthly instalments. Legal title stays with the funder during the term and passes to your business once all payments have been made.
Do I own the asset at the end of a hire purchase agreement?
Yes. Ownership passes to your business once every payment under the agreement has been made, including any balloon. Many agreements also carry a small option to purchase fee payable at the end, which is what formally transfers title. Check whether that fee is included in the quoted total before you compare one offer against another.
How is VAT treated on business hire purchase?
VAT is normally payable in full on the asset price at the start of the agreement rather than spread across the instalments. A VAT registered business will usually recover it on the next return, so the effect is on cash flow timing rather than total cost. Some lenders will fund the VAT element as a separate short facility.
What is the difference between hire purchase and a finance lease?
Hire purchase transfers ownership to your business at the end and VAT is normally due up front on the asset price. A finance lease leaves title with the funder and charges VAT on each rental, which spreads it across the term and keeps the initial outlay lower. Hire purchase suits assets you intend to keep.
Can I settle a hire purchase agreement early?
Yes. Ask the funder for a settlement figure, which is the outstanding capital plus a proportion of the remaining interest and often a settlement fee. These are non-regulated business agreements, so the statutory rebate rules that apply to consumer credit do not apply. How much future interest is rebated depends on the terms you signed.
Can a new business get commercial hire purchase?
In many cases, yes. Lenders that support newly formed companies usually want to see relevant sector experience from the directors, and will commonly ask for a personal guarantee, a deposit, or both. The asset itself matters as well, since a hard asset with a clear resale market gives the lender more room than a soft one.
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About the author
Marcus Wright is the owner and founder of Bolton Business Finance Ltd. He has worked in financial services since 2008, beginning his career at Santander, and has been a commercial finance broker since March 2019.
He founded Bolton Business Finance in 2020 to give businesses access to the whole lending market rather than one bank’s own product range. The firm is a member of the National Association of Commercial Finance Brokers and works with a panel of 135+ lenders.
Marcus arranges commercial mortgages, bridging, development finance, business loans, asset finance, invoice finance and merchant cash advances. Call 0161 546 9128.
Bolton Business Finance Ltd is an independent commercial finance brokerage, not a lender. We are not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. All lending is for business purposes only. Nothing on this page is a quotation or an offer of finance, and all facilities are subject to status, lender criteria and the assets offered as security. Registered address: Westgate House, 1 Westgate Avenue, Bolton, Greater Manchester, BL1 4RF. Company number 12495909.