Hire Purchase: A Smarter Way to Fund Business Assets

Paying upfront for vehicles, machinery, or specialised equipment can strain cash flow. Hire purchase (HP) offers an alternative by letting you use the asset straight away while making fixed monthly repayments.

What is Hire Purchase?
With a hire purchase, your financier buys the asset and rents it back to you over a set term. You don’t own the asset during the contract period, which means it typically sits off your balance sheet, freeing up borrowing capacity. Each repayment includes GST, which is claimable in your BAS, and the entire repayment is generally deductible as an operating expense. At the end of the term, you have the option to acquire ownership, or upgrade.

Why Businesses Choose Hire Purchase:

• Full deductibility: Because HP is structured as a rental, repayments are usually a tax-deductible operating cost.
• Cash flow friendly: There’s no large upfront payment; costs are spread evenly across the term.
• GST advantages: GST is charged on each repayment instead of the full purchase price at settlement.
• Off-balance-sheet financing: HP agreements generally don’t appear as a liability on your books, which helps maintain a stronger balance sheet position.
• Flexibility: Terms can be customised to your business needs, with options to own the asset at the end of the term or roll into a new agreement.

When Hire Purchase Makes Sense:
Hire purchase suits businesses that:

• Want to preserve borrowing power and keep balance sheets lean
• Prefer the simplicity of claiming full rental payments as a deduction
• Need predictable, structured repayments
• Regularly upgrade assets, such as vehicles, heavy machinery, or tech equipment

Final Word:
Hire purchase is a smart way to access the tools your business needs while keeping your finances agile. It’s a flexible, tax-effective structure that protects cash flow and allows you to choose ownership or upgrades later.

If you’d like to explore how a hire purchase could work for your business, we can walk you through the options and find a structure that fits your cash flow. Contact us.