How does hire purchase work?
As the name implies, hire purchase means paying the price of your purchase in instalments after the acquired asset has changed owners. In most cases, hire purchase is implemented so that the buyer pays a pre-determined instalment monthly to the account of the bank that granted the loan.
Hire purchase is a sensible solution when your company needs to finance an investment with monthly payments instead of a one-off payment.
Examples of assets suitable for hire-purchase finance are plant and equipment, transport equipment or other machinery needed in your company’s operations. The asset may be new or used. You do not need to provide any separate security for the hire-purchase finance, as the purchased asset serves as the security.