This is the most typical and readily available credit facility.
In basic terms, you source the asset and negotiate the purchase price with the supplier. You pay a deposit to the finance company, typically 10-20%, and the finance company then takes title direct from the supplier.
Even though you are technically not the owner of the asset during the agreement, subject to eligibility you can still claim the writing down allowances as though you had made the purchase outright.
At inception you would usually be required to pay a documentation (or administration, arrangement) fee of £100-250 and the full purchase VAT. You will then, subject to eligibility, recover the VAT yourself. You repay the outstanding amount and interest in pre-agreed instalments over the period of the agreement.
At the end of the agreement you obtain title through the payment of an 'Option to Purchase Fee'. This fee is often a token gesture to transfer title, but some finance companies do still charge a significant fee of £10-150. Hire Purchase agreements can be based on a fixed or variable rate, and the monthly commitment can be reduced by the inclusion of a balloon.
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