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The commercial hire purchase is available to any business professionals, either as individuals, partnerships or companies.
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One80FinancialServicesPtyLtd September26,2017 SimpleGuideaboutCommercialHire Purchase A commercial hire purchase is basically an agreement between the owner of the asset which is the financier and the hirer. In return of regularrepaymentsfortheassets,thehirercantakepossessionof the assets but cannot own them till the final payment is made to the owner or financier. Once the paymentisdone,youcantakefullpossessionofyourassets. The commercial hire purchase is available to any business professionals, either as individuals, partnerships or companies. It is used to purchase goods like vehicles, plan equipment,motorhomes, earthmoving machinery, etc. If you havepurchasedanyassetwithin6monthsyoucanrefinanceback eitherasasaleorbuyback. Your finance company will pay for the asset directly to theassetdealerandyouasahirerhavetopay the balance plus interest charges monthly over a fixed period of time. Generally,therepaymentlasts between 12 and 48 months. Regardless of interest rates, you need to pay the monthly paymentsina fixed amount. Although, the repayment term is fixed, you can also repay in full and settleyourcredit agreementwiththefinancieratanytime. If you are settling your amount early, you may get benefit from a rebate of interest. The finance company registers a financial interest, which is removed when you make a final payment. It is observed that a maximum number of people use commercial hire purchase to buy their vehicles, commercialvehicles,etc. 1
WhatisneededfromtheHirer? The majority of finance agreements needadeposit.Thefinancecompanieslookforanamountthatis appropriate to the individual hirer’s circumstances. Theyalsoconsiderthevehiclevalueandmileage. Usually,thefinancecompaniestakeaminimumof5%. Hirers will need to submit their driving license that is used as proof of identity and for cross verification of the signature. Usually, the hire purchase traders are responsible and they offer appropriate andaffordableloantotheircustomers.Afewfinancecompaniesrequirebankstatements so as to establish some affordability and stability.Also,asacustomer,youmayberequiredtosubmit acertificateofcomprehensiveinsurance. BenefitsofHirePurchase: Herearefewadvantagesofchoosinghirepurchase: Nolargeupfrontinvestmentasthecostoftheassetisrepaidbymonthlyinstallments. Thefixedmonthlyinstallmentswillnotalleviateevenifabankincreasesitsinterestrates. Youwillowntheassetonceyourloanissettled. YoudonothavetopayVATonmonthlyinstallments. Manyfinancecompaniesdonotneedanydeposit. As the asset is financed by the financier andthecompanyownsittillthelastpaymentispaid, itmakesitasufficientsecurityinmostcases. Youcanbespokeyourrepaymentsaccordingtoyourcashflow. Youcanrepaytheloanamountinfullatanytime. ● ● ● ● ● ● ● ● DisadvantagesofHirePurchase: Hereareafewdisadvantagesofthehirepurchase: The loan is secured against the asset. Thus, the asset can berepossessedifpaymentsarenot paid. Failingtopayanyloanamountnegativelyaffectcreditrating. Thefinancieristhelegalownersoftheassetsuntiltheloanamountispaidinfull. Repaymentamountcanchangeifthereisachangeininterestcharges. ● ● ● ● Commercial Hire purchase is best if you do not have any financial support from anyone. Hope this GuideDocumentisaperfectguideaboutCommercialHirePurchase.Staytunedformoreupdates. 2
