If, as a business, you are looking at using a commercial hire purchase to obtain your next car, there are a number of things to bear in mind before you take the plunge. For those not in the know, a commercial hire purchase (CHP), also referred to as an operating lease, is a commercial finance product that allows you to hire the car from the financier for a fixed monthly repayment over a set period.
Obtaining a commercial hire purchase is much easier nowadays compared to years gone past, with a number of commercial finance products to choose from with a fixed repayment system over a number of months.
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Deciding Commercial Hire Purchase is For You
There are many factors to consider when it comes to deciding whether commercial hire purchase is what you’re after. Organising finance is one of the most important things when it comes to buying a new car – but there are many benefits of commercial hire purchases you’re likely to find if you pay for your car up-front. Be sure to take a good look at your situation and decide whether the benefits outweigh the responsibility of having set monthly repayments.
How Does it Work
With a commercial hire purchase you repay a fixed amount over a number of months. The vehicle will become yours once the repayments have been finalised. If you are a commercial user or a business, and you account for Goods and Service Tax (GST), there may be tax deductions available. Another reason businesses often favour this type of finance is because the interest levels are fixed quite low as the finance is secured against the value of the vehicle. At the end of the fixed term, you can often trade-in the vehicle, or re-finance the residual value to keep the car.
Setting your Payments
As with any form of finance, it is important to only look at what you can afford. With that said, it pays in many instances to look at what deals are available with attractive interest levels. On the back of the pandemic and supply chain issues, a number of dealers are struggling to secure stock for ‘today’, but they are more than happy to deal for ‘tomorrow’. So don’t be shy when it comes to bargaining, especially if it means you can snap up some extras or the like. Most of all, be sure to clarify your commitments and use a calculator before you set up a commercial hire purchase, so you know exactly what pay structure is expected of you.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.