Myfleet Commercial Hire Purchase (CHP)
A Commercial Hire Purchase has historically been the go-to finance solution for both small business and individuals on a car allowance or with significant business usage. Recent changes to the tax rules around GST have made CHP financing a little less attractive to individuals (see Chattel Mortgage). However CHP still has a place in small business financing for passenger cars, commercial vehicles, plant, equipment or any other material asset with the GST that is now being applied fully claimable by a suitably registered business.
Myfleet has a great deal of experience is setting up CHP arrangements and can provide immediate quote turnaround combined with a simple no fuss application and settlement process.
What is Commercial Hire Purchase?
A Commercial Hire Purchase is a straight forward loan and fixed repayment scenario typically with a balloon (lump sum) payout at the end of the loan period. The idea of structuring a loan like this is to help preserve the cash flow and keep month-to-month payments to a minimum allowing investment in other areas of the business.
The balloon payment at end of the loan period is set by the customer, and can be zero or any value up to the likely market value of the asset at end of the loan period. The higher the balloon is set the lower the repayment value and vice-versa. The loan period will typically range up to 60 months but can be longer depending on the type of asset being purchased. The length of the loan period selected will affect the repayment amounts.
From a tax perspective GST is charged on the interest and fee component of the repayments (claimable) and the usual rules of depreciation and deductions apply in the same way as if you owned the vehicle.
