Finance Lease vs Hire Purchase

If you are considering finance to acquire your scaffolding equipment, you will be given options of various finance agreements. That is why it is important to be able to differentiate between your options and choose an agreement best suited to you and your business.

In this blog we will be focusing on two of our most popular finance agreements: finance lease and hire purchase.

What is a Finance Lease?

A finance lease, AKA capital lease, is the form of finance that most are familiar with. A finance lease allows you to spread the cost of an asset over an agreed period. Most finance lease agreements run from 2-5 years. But you will be able to choose an agreement period that works best for you.

There are many benefits that come through taking out a finance lease. One of them is tax relief. 100% of your rental is deductible against your company’s corporation tax. Also, your VAT will be spread along with the capital cost of the asset- saving you from paying that lump sum upfront.

Another thing that is great about finance leases is that you can implement a refresh cycle. A refresh cycle is where you can renew your equipment at the end of lease. Therefore, you can keep up to date with all the latest kit on a regular basis. This is great for companies that want to remain competitive in the sector.

What is a Hire Purchase?

A hire purchase again allows you to spread the expense of your chosen asset but also own it once your agreement is over. Therefore, this is a great way to ultimately own your equipment without causing damage to your cash flow. This is ideal for appreciating assets or just timeless assets that won’t drastically decrease in value over time.

However, unlike finance leases, it should be noted that you will be required to pay VAT upfront on any hire purchases.

Nevertheless, both agreement types will provide you with the following benefits:

• Cash flow

Of course, this is the most obvious advantage of leasing. Cash flow health is vital to the running of a successful business. And that is why more and more businesses across the UK are switching on to leasing.

• Enables you to pay for the equipment as you go

You wouldn’t pay your employees years in advance so why do the same for your equipment? Leasing allows you to pay as the equipment adds value to your business.

• Alternative funding line

Leasing will provide you with an additional funding facility. Therefore, you won’t have to use up an existing one!

• Repayment flexibility

Choose between agreement terms of 2-7 years.

If you are still unsure on the best finance route to go down, please don’t hesitate to get in touch. Give us a call on 01494 506 383. Or send an email to hello@scaffoldfinance.co.uk and we would be happy to answer any questions you may have.