A Finance Lease is a contract in which you have use of a selected piece of equipment for an agreed time frame in return for a series of rental payments. This type of lease can benefit businesses that need the latest vehicles or equipment without tying up a large amount of capital.
A Hire Purchase agreement is a contract by which the owner gives to you the right to use the equipment and the right to acquire ownership of the equipment by making progressive payments. When you make the final instalment, title of the equipment transfers to you. You can tailor payment options, including the loan period, a deposit and a larger final balloon payment.
You take ownership of the goods upon delivery, with the finance provider securing the loan by a charge (or mortgage) over the goods. You can tailor your loan payments by choosing the term — typically up to five years. Other payment options can include a deposit and a larger final instalment.
Flexibility: You can structure your equipment finance agreement to set the term and the repayments that work best for your business. This means you can manage repayments more easily.
Balance Cashflow: The regular nature of the hire purchase or lease payments helps you to better forecast your cash flow.
Fixed Rate Finance: In most cases the payments are fixed throughout the equipment finance agreement, so you’ll know at the beginning of the agreement what your repayments will be.
Maximum Finance: Equipment finance could provide finance for the entire cost of the equipment including GST, which means there won’t be a big hole in your cashflow.
Tax Benefits: Short life depreciating equipment (such as vehicles) lose value at a relatively high rate. In many cases you are able to claim the depreciation in the equipment, as well as the interest paid, which may have a tax benefit. You should always seek your own tax advice before entering an equipment finance agreement.
Quality Equipment: Because you don’t have to outlay the cash to buy the equipment, you may be able to obtain higher quality assets that last longer. It becomes plausible for a business to invest in good quality assets which might look unaffordable or expensive otherwise.
No Risk of Obsolescence: If you’re worried about equipment or technology becoming obsolete, equipment finance allows you to invest with a reduced risk of investing in a technology that might soon become out-dated.