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Finance Products

Commerical Hire Purchase

A Commercial Hire Purchase (CHP) (also known as a Corporate Hire Purchase, Hire Purchase or Offer to Hire) is a commercial finance product where the customer hires the vehicle from the financier for a fixed monthly repayment over a set period of time.

How does a Commercial Hire Purchase work?

A Commerical Hire Purchase involves two main parties:

• A financier purchases the vehicle on behalf of the customer and hire it back to them.
• The customer uses the vehicle purchased on their behalf, pays the applicable repayment but does not own the vehicle

On completion of the contract, once the total price of the vehicle and the incurred interest have been paid, the customer takes ownership of the vehicle.

Benefits of a Commercial Hire Purchase

A CHP has numerous benefits including:

• Contract terms that are flexible in length, range from 12 to 60 months
• Fixed interest rate and monthly repayments
• Ability to use a deposit such as cash or vehicle trade in at time of purchase
• The finance (loan) is secured against the vehicle itself
• The ability to use of a residual (balloon) value that can assist in tailoring repayments to a budget

There may also be taxation benefits to applicable customers:

• GST is not charged on the monthly repayment or the contract residual (balloon) amount
• When the vehicle is used for business purposes a tax deduction may be available
• Customers registered for GST may claim the GST in the vehicle price as an input credit on their next Business Activity Statement (BAS)

Who does a Commercial Hire Purchase suit?

A Commercial Hire Purchase is suitable for companies, partnerships and sole traders who account for GST on an accrual basis, individuals using the vehicle for business purposes.

Those entities using the cash accounting method may be better suited towards a Chattel Mortgage

Tax implications of a Commercial Hire Purchase

• GST is charged on the vehicle's purchase price
• This GST may be claimed as an Input Tax Credit (in part or in full) by customers (hirers) registered for GST as soon as their next Business Activity Statement (BAS) is due, rather than over the term of the loan
• For businesses using the accrual accounting method, the GST may be claimed as a lump sum on their next BAS
• For businesses using the cash accounting method, the GST may be claimed as instalments over the term of the contract
• GST however is not charged on the monthly rental or contract residual (balloon)
• Interest charges on the loan and depreciation up to the ATO's depreciation limit may be claimed as a tax deduction by the customer (hirer)

Want more information? Simply click here to book a call, phone us on 1300 885 074 or email info@aspirebenefits.com.au.