Hire Purchase v Lease Rental

We often get asked "hire purchase" or "lease", or sometimes even "should I buy outright"?

My first top tip is therefore to first do the maths and see how much cash you will actually be paying out (i.e. paying £x amount per month multiplied by the number of months). You will have to accept that spreading the cost of the asset will cost you some finance but just get an understanding of the overall cost to you first.

Look for the "APR rate" as the industry benchmark for comparing the finance cost however do not base your entire decision on this factor alone. It is important to appreciate that, in the current environment, lenders simply won't loan to everyone for a variety of (sometimes trivial) reasons; some also ask for a phenomenal volume of information to support an application. Getting the deal done, with the minimum of fuss, and perhaps within an acceptable timescale, is often worth say a percentage point of interest.

Finally, rest assured that you will get tax relief for the cost of the asset whatever method you choose; it's just that different methods will give it to you over different timescales.

Buying it outright, or by "hire purchase" or "lease purchase" (and be careful with wording as they change sometimes) means you either own the asset from the start, or will do upon completion of the agreement. This will grant you the ability to claim Capital Allowances on the full cost price as soon as you commit to the contract.

You would also be able to claim tax relief against the interest charged on the subsequent payments to the finance company, this saving would be recognised in line with the interest payments being made.

A "lease rental" means you will never legally own the asset (it may be that they suggest that they will "not bother" to come and collect it from you upon completion) but technically this means you can only claim the tax relief as you make each payment and not entirely up front as above. Often these are characterised by a monthly amount which shows "+ VAT".

As you may imagine, because of our frequent exposure to such deals, we get a feel for the better finance providers if this ever helps.