Under asset leasing the financier purchases the equipment on behalf of the business. The business then makes a fixed monthly lease rental for the term of the lease. At the end of the lease term the business can:
- pay out of the residual and take ownership of the equipment
- sell the equipment, or
- or refinance the residual and continue the lease.
Commercial hire purchase
A hire purchase agreement is an arrangement to purchase equipment subject to payment terms. During the term of the agreement, the financier owns the vehicle, plant or equipment.
Ownership is automatically transferred to your business when it makes the final payment. The choice is also available to purchase the equipment at any time during the term of the agreement.
This form of finance allows the business to take ownership of the equipment at the time of purchase. The financier takes a mortgage over the equipment as security, and advances the funds at time of purchase. Once the contract is complete, the ownership of the equipment is passed back to the business.
When using equipment rental, the financier buys the equipment on behalf of the business and rents it to the business for fixed payments over a fixed period. The business then simply makes these fixed monthly payments. At the end of the contract the business can opt to:
- hand the equipment back with no more to pay
- continue the rental agreement
- buy the equipment outright at market value