Commercial Hire Purchase | Business Car Finance

A commercial car hire purchase is a method of vehicle financing.
CHP essentially means that a finance company buys a vehicle for a customer and then in turn grants the client use and custody of the motor vehicle provided that that customer honours a pre-agreed repayment plan. The purpose of this transaction is that ownership is gained immediately upon the client making the final payment including any outstanding balances.

Advantages

* Lower interest rates because it is secured finance (i.e. lenders offers the loan with the car as security)
* Various lengths in the repayment plans tailored to individual needs (two to five years)
* It allows to spread out the cost of your purchase
* The amount of monthly repayments are set, giving financial certainty
* The vehicle belongs to you after the final payment

Disadvantages

* The cost per month will usually be higher than vehicle leasing.
* You have to consider the cost of depreciation of the vehicle if you decide to sell it.
* Range of choice of vehicles may be an issue

Tax Implications of a CHP

* If the vehicle is used for business purposes tax deductions may be claimed
* If the purchase is registered for GST Input Tax Credits may be available. (An input tax credit entitlement generally is a repayment or credit of GST paid on supplies that are acquired for any business purpose in carrying on that business' enterprise)
* With CHP financing GST is calculated and charged on the price of the motor vehicle but neither on the monthly repayment amounts nor on the residual amounts.
* Tax deductions can also commonly be claimed for the decline in value of the car as well as on the interest charged

Eligibility Criteria for a CHP

Businesses (companies, sole traders etc.) as well individuals are eligible for a Commercial Hire Purchase and the main criteria for being eligible for a Commercial Hire Purchase is that the vehicle’s primary use is of income producing nature, i.e. the car is used for business.

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Apply for a CHP

If you would like some more information how we can help your business with this type of finance please get in touch with one of our consultants.