Jay City Finance – Hire Purchase

Hire Purchase is designed for businesses that want to ultimately own their asset but prefer to spread the cost over time. You pay an initial deposit followed by fixed monthly instalments, which makes budgeting easier and reduces pressure on day-to-day cashflow. At the end of the agreement, ownership automatically passes to you, giving you a fully paid-for asset that can be used for many more years without further finance costs.

From an accounting perspective, the asset appears on your balance sheet from day one, and you claim capital allowances on it, potentially reducing your tax bill. The interest portion of your repayments is tax-deductible but, because you’re buying rather than renting, full VAT is payable on commencement of the HP agreement unless a VAT deferral is agreed by a lender.

HP suits those seeking long-term ownership with instalment flexibility. It allows you to manage cashflow effectively while building your business assets.