Commercial Hire Purchase

Commercial Hire Purchase is a product where the company hires the car, light truck or any type of commercial vehicle from the financier for set period with a fixed monthly payment.

• What is it?
• Why a Commercial Hire Purchase?
• Who does it suit?
• The Tax Man
• More information

What is it?

With a Commercial Hire Purchase the Finance Company purchases the car on your behalf, but retains ownership of the car. You then hire the car from the Finance Company for a set period of time.

The payments are worked out so that the total purchase price minus residual is covered over the full hire period, so that at the end of the hire you take ownership of the car.

Why a Commercial Hire Purchase?

• Contract terms from 12 to 60 months
• The higher the residual, the lower the payments which can help cash flow
• It has a fixed interest rates
• Repayments are fixed
• You can use a deposit to decrease the loan repayments  
• When used for business purposes, Tax Deductions may apply
• The GST on the hire payments can be claimed

Who does it suit?

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

The Tax Man and your Commercial Hire Purchase.

Where the hirer is registered for GST, they can apply Input Tax Credits to claim some or all of the GST contained in the purchase price of the vehicle.

Businesses using Accrual accounting can claim the GST as a lump sum on their next Business Activity Statement (BAS), whereas those using Cash accounting can claim the GST in instalments over the term of the contract.

GST is not charged on the monthly repayment or on the balloon (final instalment) amount.

Where the vehicle is used for business purposes, the hirer can claim depreciation (capped at the Depreciation Limit of $57,180) and interest charges on the contract as a tax deduction.

Want to know more?

If you have any questions or would like to know more about a Commercial Hire Purchase, please send us an online enquiry and we will contact you soon.

Alternatively you can use the Online Calculator to get an idea of what you can afford.