Hire purchase

Hire purchase is a suitable form of financing for your company’s investments if the life cycle of the asset to be acquired will be long. Your company will become the owner of the asset after the agreement period has ended.

Features of hire-purchase finance

The Finnish act on hire purchase governs the use of financing. The financier has the right of reservation of ownership to the financed asset throughout the financing period, but your company can recognise depreciation on the asset in its bookkeeping as usual. The interest on a hire-purchase instalment is a tax-deductible expense, and you can deduct VAT from the entire purchase price right away. The title to the asset will be automatically assigned to your company once the last instalment has been paid.

  • The self-financing share required for hire-purchase finance may include both a down payment and trade-ins.
  • The maximum hire-purchase period is 5 years.
  • You can repay the financing as an annuity or in equal installments.
  • The asset acquired with hire-purchase finance must be delivered acceptably before payment to the vendor.
  • The asset must be insured.
  • The hire-purchase finance may be repaid in full in the middle of the agreement period without your company incurring any additional costs.
  • Acquisition finance has no effect on the investment subsidies granted by the Centres for Economic Development, Transport and the Environment (ELY), but the subsidies can also be utilised when investments are financed with hire purchase. The investment subsidies of the ELY Centres may also be utilised when an acquisition has been made with acquisition finance.

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.

Your benefits

Hire-purchase finance is a useful alternative particularly when an acquisition required by your business would not be otherwise possible.

When the investment costs are spread by means of hire purchase over a longer period of time, the risks related to the acquisition decrease even if the interest rates and other related costs raised the final total expenses of the investment. At the same time, hire purchase makes your company's budgeting and financial planning easier.

For instance, hire purchase enables companies engaged in the manufacturing industry to keep their production equipment modern. This is vital on today’s competitive market especially when a company's business is export-oriented: state-of-the art machinery contributes to the company’s competitiveness and enhances sustainable development of a successful business.

How to apply for hire purchase finance

As a Nordea customer, you may apply for a business loan up to 50,000 euros from Nordea Business online bank. You can also apply for hire purchase finance easily on a finance application form at nordea.fi. 

Remember to send us the required appendices through Omaposti. We will not be able to process your hire purchase finance application with the appendices, so please check that you can provide us with the following information: 

  • Information about your company’s ownership structure
  • Financial statements (total profit and balance sheet) or the operating income from last year
  • Your company’s description and budget for next year
  • Business plan (new company)

You might also be interested in the following topics related to hire purchase finance:

Still comparing different financing options? In our guide, you will find more information about the finance options finance options we offer to different types of companies.

Looking for an easy financing option without security? Corporate FlexiCredit is a quick business loan up to 25,000 euros without security. 

Our loan calculator is a handy tool when planning the business loan amount to apply for. Please keep in mind that we will be happy to help you find the optimal financing solution for your company!

Frequently asked questions about hire purchase