Hire purchase

Whether you’re buying a car, IT, or equipment, hire purchases can work to grow your business.

What is a hire purchase?

A hire purchase is a flexible and cash flow neutral finance solution for business looking to eventually own cars, equipment, or long-term assets. Repayments can be tailored to your business cycle. You can reduce repayments using a balloon payment (residual value) payment, due at the end of the loan term. A hire purchase doesn’t require a deposit, and all repayments are on the books as operating expenses. As a business loan, you can also finance maintenance and servicing as part of the hire purchase agreement, with an amount more than 100% of your asset’s value.

Accounting and tax benefits of hire purchases

With all hire purchases, ownership of the equipment or car rests with the lender until the end of the loan term. This means you are effectively hiring or renting the asset which means repayments are classified as a business operating expense. Your lender may claim GST, depreciation, and interest paid on the loan and pass it on as savings to you. This may suit businesses that require off-balance sheet accounting. Our experienced consultants have access to the best finance products and rates. Savvy will make it simple and easy for you to make an informed decision.

Getting you approved with your chattel mortgage

We are accredited with the most reputable lenders in Australia giving you a fair choice to compare.

Competitive rates
We connect with over 25 lenders to drive down interest rates and provide more value.
Vehicle ownership
You own the vehicle once the final payment is made (including any residual balloon amount)
Fully maintained leases
All you have to do is drive. The costs are taken care of by your employer, including FBT and on-road costs.
Tax effective
Under a Hire Purchase, interest component of repayments and depreciation is tax deductable.
No deposit
No deposit required under a Hire Purchase agreement. 100% finance available for approved applicants.
Help from start to finish
Our personal consultant will guide you through the process, answering all your questions along the way.

Tips for saving more on hire purchases

A step-by-step guide to making the most of a hire purchase

Figure out what your business needs

Though not as common as their fixed counterparts, you can get a variable rate car loan. These are harder to budget for due to their rates being pegged by the official cash rate set by the RBA. You could experience reduced repayments if the market goes down; but increased payments if the rates go up.

Is your accounting method suitable?

Making additional repayments on your loan can reduce your loan term and overall interest paid. The easiest way is to increase your repayment frequency from monthly to fortnightly payments, as you make 26 payments throughout the year, equivalent to an “extra” monthly payment. Some loans may allow you to make extra lump sum repayments, “top ups”, or increase your regular repayment amount without penalty. This helps reduce the amount of interest and your loan term.

Set your repayments

The best practice is to have at least 20% in deposit or trade-in value when buying a car. However, you can borrow 100% of the vehicles value in some instances, conditions may apply.

Apply with a broker

If you have a lower than average credit score (600 or below, from a top score of 1200) you may find it difficult to obtain car finance. Options are available for people with bad or impaired credit to gain car loan approval. In most cases, these loans will have higher than average interest rates, due to increased risk on a lender’s part. Even so, it can be a pathway to car ownership.

Determine the tax benefits

For the entrepreneur or the self-employed, car finance can be a tricky path to navigate. Some sole traders cannot qualify for business car loans due to the 50% use case threshold. In that instance, they can opt for a low documentation or “low doc” loan, which uses fewer points of data to assess creditworthiness. This helps you get a car loan but may have higher interest rates as a result.