What is the difference between Hire Purchase or Leasing?

When we are investing in new equipment or vehicles in our business it is important to understand and know the best finance options available to us.

One of the most asked questions we receive is what is the difference between a hire purchase or a lease?

When you lease you are effectively renting your asset with either fixed or variable repayment options and you claim this as an expense.

You will pay GST on the lease repayments of which you can claim back. At the end of the term, you will need to pay out a residual payment.

The key is to take a term for a period for which you want to use the asset. For example, if you want a car for 3 years, take out a 3-year lease agreement.

When you use hire purchase you purchase the goods through instalment payments and at the end of your term you own your goods. Instead of claiming your repayments as an expense you will be claiming depreciation and interest.

You can also claim your GST on the whole purchase price upfront.

If you would like to learn more about these finance options and other long-term finance strategies then we recommend you watch DFK Australia New Zealand’s webinar on Cash Flow below:

Please contact your DFK Benjamin King Money representative to discuss how these options may benefit you.