What Is Hire Purchase?
A Hire Purchase agreement allows a business to use an asset while paying it off over time.
The lender owns the asset until the final repayment is made.
Main Features of Hire Purchase
- Fixed repayments
- Business uses the asset immediately
- Ownership transfers after final payment
- Balloon payment option available
- GST may be claimed progressively on repayments
Best Suited For
- Businesses wanting eventual ownership
- Companies preferring fixed budgeting
- Businesses preserving upfront cash
What Is a Finance Lease?
A Finance Lease allows a business to rent equipment or vehicles for business use over an agreed period.
The lender owns the asset during the lease term.
Main Features of a Lease
- Lower upfront costs
- Fixed rental payments
- Possible tax deductions on lease payments
- Option to upgrade equipment regularly
- Flexible end-of-lease options
End of Lease Options
At the end of the lease, the business may:
- Upgrade equipment
- Continue leasing
- Purchase the asset
- Return the asset
Best Suited For
- Businesses regularly upgrading equipment
- Companies wanting lower upfront costs
- Businesses focused on cash flow
What Is a Chattel Mortgage?
A Chattel Mortgage is a business loan where the borrower owns the asset from the beginning, while the lender holds security over it.
It is one of the most common finance options for business vehicles and equipment in Australia.
Main Features of Chattel Mortgage
- Business owns the asset immediately
- Fixed repayments
- Balloon payment available
- Potential GST claim upfront
- Possible depreciation and interest tax benefits
Best Suited For
- Businesses wanting ownership from day one
- ABN holders purchasing vehicles or equipment
- Businesses seeking tax-effective structures
Hire Purchase vs Lease vs Chattel Mortgage
| Feature | Hire Purchase | Finance Lease | Chattel Mortgage |
|---|---|---|---|
| Ownership During Term | Lender | Lender | Borrower |
| Ownership At End | Borrower | Optional | Borrower |
| Upfront GST Claim | Usually progressive | Usually on rentals | Often upfront |
| Balloon Payment | Available | Residual value | Available |
| Best For | Ownership later | Flexibility/upgrades | Immediate ownership |
