Asset finance UK: hire purchase, leasing and refinance explained
Hire purchase, finance lease, operating lease and asset refinance, how each works, tax treatment, and which suits your business.
The four main flavours
Hire purchase: you own the asset at the end. Fixed monthly payments, VAT paid up front, capital allowances claimable from day one.
Finance lease: long-term rental with substantially all the risks and rewards of ownership. Rentals expensed to P&L; balance-sheet treatment depends on IFRS 16 / FRS 102.
Operating lease: shorter-term rental. Asset returned at end of term. Cleanest off-balance-sheet treatment for smaller entities.
Asset refinance: raise capital against an asset you already own. Useful to release cash from paid-down plant.
Tax and accounting treatment, briefly
Hire purchase: capital allowances (100% Annual Investment Allowance available up to £1m); interest deductible.
Finance lease: rentals deductible; asset on balance sheet under IFRS 16.
Operating lease: rentals deductible; smaller entities under FRS 102 can keep off balance sheet.
Always confirm treatment with your accountant, the accounting standard applied to the entity matters.
Common asset classes we fund
Commercial vehicles, plant and machinery, catering equipment, IT and telecoms hardware, medical equipment, agricultural equipment, and specialist industrial kit.
Compare whole-life asset cost
Start with utilisation
Estimate productive hours, downtime, maintenance and residual value. The payment must work at realistic use, not maximum capacity.
Separate ownership choices
Compare deposit, rentals, final payment, purchase option, mileage or usage limits and return conditions.
Confirm tax treatment
Ask an accountant to confirm VAT, capital allowances and accounting treatment for the specific agreement and entity.
Application checklist
- Supplier invoice and asset specification
- New or used status and age
- Deposit and payment schedule
- Final or balloon payment
- Maintenance and insurance
- End-of-term ownership or return terms
Useful primary and industry references
These references support further research. Product terms and official guidance can change.
Frequently asked
Which is cheaper, HP or lease?
HP has a higher monthly cost but you own the asset. Lease is lower monthly cost but the asset returns. Total-cost-of-ownership comparison is the honest test.
Can I finance a used asset?
Yes, subject to age and residual value. Most funders lend on assets up to 10 years old at end of term.
How fast is asset finance?
Timing depends on the asset, supplier, applicant, documentation and whether inspection or valuation is required. Ask for a realistic completion checklist before committing to a purchase date.
