Hire Purchase

Last updated 01 Mar 2019
In a hire purchase agreement, the lender purchases an asset, a piece of equipment or machinery and grants you, the borrower or hirer, the right to use it immediately and to buy it over time through progressive instalment.

The instalment include both interest and principal payments so that once the final payment is made, you will own the asset outright. A hire purchase agreement will allow you to spread out the payment of a large asset over time, avoiding the one time cash outlay that a large investment would normally create.
Key Features
Loan Size
$5k to $2m
Loan Term
1 to 5 years
Interest rate
5% - 15%
Approval Speed
Fast / Medium
Common Uses of Hire Purchase Agreement
A hire purchase agreement is commonly used for sizeable, capital intensive investments in machinery, plant or equipment.
You can often structure the payment calendar to suit your needs, whether that is larger instalment payments or a large balloon payment at the end of the lease term.
The GST paid on rental and other charges may be eligible for tax credits.
Keep in Mind
You will not own the asset until the end of the payment period and you may be required to pay a deposit upon set-up of the agreement.
Only the interest portion of the payment instalments is categorized as expenditure for tax purposes.
Any and all repairs and maintenance of the piece of equipment are the responsibility of you the hirer.
Who Qualifies for a Hire Purchase Agreement?
As is the case for a finance lease, the fact that the lender takes the asset as collateral means that they may be more flexible in terms of your operating history, credit score etc.
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