A commercial hire purchase (CHP) agreement is a type of vehicle finance where the financier buys the car on your behalf and hires it back to you over a set period of time. You make repayments towards the vehicle and can drive it, but don't own it until the end of the agreement (when you have repaid the full amount).
Commercial hire purchases could be a good loan option for business owners who want a new vehicle (or vehicles) but also need some financial flexibility.
How does a commercial hire purchase car loan work?
As the name suggests, this is a commercial financial product for businesses. This includes sole traders, partnerships and companies.
Due to the nature of the loan, it is also referred to as a "corporate hire purchase" or "offer to hire". During the loan term, the borrower is not the owner of the car and although they have use of the car, it is only transferred to their ownership when they finish making payments. That is after the total price of the vehicle has been repaid, including any interest charges.
This is a flexible loan contract and one that is usually placed on a fixed interest rate. The borrower is able to identify the real cost of the car since monthly repayments are fixed. Some lenders will require a deposit or down payment, while in other cases trade-ins may be used.
Pros and cons
Pros
Tax deductions. You can claim depreciation and interest charges on the contract. If you use the vehicle for business, you may also be able to claim GST credits.
Flexible repayments. Commercial hire purchase contracts may range from 1 to 5 years, which means you can choose a term that suits your finances. You may also have the option of balloon payments to help manage your loan according to your cash flow.
Automatic ownership upon repayment. The vehicle is automatically transferred to the hirer for ownership upon completion of payment.
Cons
You don't own the car. During the commercial hire purchase agreement period, you are the hirer and not the owner of the car. So defaulting on repayments may cost you the car.
It can be expensive. Commercial hire purchase agreements may be more expensive than commercial car loans or other more popular car finance options. The minimum loan amount may also be higher.
Lower vehicle value when you own it. The value of a vehicle depreciates from the time it is purchased, so at the end of the hire purchase agreement the car will be worth less than when you first started driving it.
How to compare commercial hire purchase vehicle loans
Interest rates
You need to compare the interest rates with any loan you take out. Different lenders will offer different rates and this contributes to the overall cost of the loan.
Repayment flexibility
Hire purchase loans are normally repaid with fixed monthly payments. You need to find out how flexible the lender will be when it comes to your repayments and whether you will be allowed to adjust your monthly payments.
Loan features
Not all lenders require down payments and some will be willing to take a trade-in as your deposit. Compare the loan features that different lenders offer and evaluate them to find one that is most suitable for your needs.
Fees
What are the fees you would be looking at with different lenders? Note that you will not be charged GST on your monthly or residual payment.
What to watch out for
Defaulting. Remember that you do not own the car, so the implications of defaulting on payments may cost you all the other payments you’ve made. If you keep defaulting on payments, the financier may decide to take back their car.
High debt. Again, you don’t own the car until you fully settle the loan amount and interest. It’s therefore important to make smart financial decisions when it comes to the choice of car. The choice is yours and you might want to consider going for a car that is well within your budget. You need a loan that is manageable.
How to apply for commercial hire purchase car loan
Companies, partnerships, sole traders and individuals are all eligible for commercial hire purchase car loans. However, the car needs to be for business use or income purposes. Before you can apply for a commercial hire purchase car loan, it’s recommended that you use the comparison table on this page to compare what different lenders are offering. You can click on the lender’s link to access their website for more information.
You can choose to apply for the loan online, which is convenient, or physically at the lender’s offices. With both application methods, the lender will require that you fill out an application form and supply personal and financial details.
We don't compare hire purchase leases, below are a range of commercial car loans you can compare to decide what type of finance is suitable for your business' needs.
Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio
Want to buy a classic car but don't have the ready money? There are still financing options available for classic vehicles. Find out what loans you have to choose one and which one will work best for you.
DriveMyCar is an innovative peer-to-peer platform that lets you rent a privately owned car for Uber driving starting at $165 per week. Find out what cars are available and what's included to see if it's right for you.
Enjoy benefits such as insurance, roadside assistance and an extended warranty as part of a four-year operating lease agreement with Green Light Auto Finance.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We are committed to our readers and stands by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.