Truck lease
Truck Lease

Truck Hire Purchase

Truck leases are very popular nowadays because they donít require persons or businesses to spend a large amount of capital in one go. But what if there were a way for you to purchase a truck but gradually pay it off over a set length of time? This is called truck hire purchase, and itís similar to a lease-to-own program.

You typically have several options when it comes to truck hire purchase:

  • Truck Hire Purchase Fixed Rate Plan: With this option, you lock in the current interest rate at the time you make your first payment. You have the peace of mind of knowing that your payments will remain constant throughout the payment period. When you make your last payment, you own the truck, as long as youíve kept to the terms of the agreement.
  • Truck Hire Purchase Variable Rate Plan: This is a good choice if you know rates are about to come down. Of course, since rates are about as low as they ever get right now, itís probably not the best option to pick at this time. Regardless, a truck hire purchase with a variable rate means that your interest rate is calculated daily based on market and bank fluctuations. Your payments will vary based on this rate, no matter whether you make monthly or quarterly payments. If interest rates rise steeply, you can pay off the entire balance by making a lump-sum payment at any time. As with the fixed-rate plan, you own the truck after your last payment is made.
  • Truck Hire Purchase Balloon Payment Plan: If you canít afford to let go of much capital at the moment, but you still require a new truck, this may be your best option. It allows you to make very low monthly payments over the period of the agreement. At the end of the agreement, you have the option to either pay off the rest of the truck with a large balloon payment or re-finance the balloon payment and continue making small monthly or quarterly payments. In either case, once youíve completed all the payments, you own the truck.

Truck hire purchase offers several benefits over buying the truck outright. For one, you are able to claim capital allowance on the truck. The interest you pay on the truck may also be allowable against your taxable profits. In addition, you have flexibility regarding whether you wish to make monthly or quarterly payments. This preference must be set at the beginning of the agreement.

The only significant drawback of a truck hire purchase is that the truck will show up as an asset on your balance sheet, which could preclude you from purchasing any other major equipment. There are other disadvantages of purchasing a truck, such as the fact that maintenance must be done in house, but this is not a problem if your company has existing maintenance agreements and facilities. All in all, however, truck hire purchase is an excellent choice for businesses that do not require a full-service lease but also lack the capital to purchase a truck outright.

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