Also known as Lease Purchase, no difference between the two except in name. People often choose hire purchase because they eventually want to own their van and they think HP is the only way to achieve this. You can in fact take a van on a finance lease contract and still end up owning it if you want to.
Hire Purchase on a van is much the same as HP on anything else, like a television. You divide the amount borrowed by the number of months of the contract, and add a bit for interest. The main difference in HP on a van is that you cannot finance the VAT on a van and therefore you normally have to pay all the VAT as a deposit. If you are not VAT registered then it is a big lump of money to pay out that can’t really be recovered at all until you eventually sell the van. There is an advantage in that there is no VAT on the repayments but this is really just because you have paid all the VAT already.
One of the big downsides of Hire Purchase is that manufacturers don’t like it. The reason is that the price of the van is disclosed and so any discount from the manufacturer’s list price can be seen. Why is this relevant? Because manufacturers don’t want to be seen throwing too much discount at a product and they also need to be wary of not upsetting their franchised dealers. Therefore what most people don’t realise is that you generally pay more for a van, ie the actual cost of the metal, if you acquire it by hire purchase.
We are not accountants, although the MD used to work for a firm of chartered accountants when he still had hair! Therefore we do not advise on the best tax position for businesses in terms of the type of finance they take. All businesses are different so please talk to your own accountant, or our preferred partner Tax Assist, in order to find the best acquisition method for your vehicle.
