2 min read
Estimates an annualised cost including fees so you can compare offers like-for-like. Illustrative, not a statutory APR.
How asset finance is usually quoted
Hire purchase spreads the cost of equipment over its life, often quoted on a flat rate. As with any flat rate, the true APR is roughly double, because interest is charged on the full price throughout — see converting a flat rate to an APR.
Balloon payments and residual value
Many deals defer part of the cost to a balloon payment tied to the asset’s residual value, cutting monthly instalments. That keeps cash flow easy but leaves a lump sum to fund, refinance or hand the asset back for at the end.
VAT and fees
On hire purchase you usually reclaim the VAT up front; on a lease it is spread across the rentals — a timing difference that affects cash flow. Documentation and option-to-purchase fees add to the total. Factor them into the real cost.
Compare against a loan
Convert the flat rate to an APR, add the balloon and fees, and compare with financing the same asset on a term loan. The calculator below helps you see the total cost.
Where Credicorp fits
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.
Frequently asked questions
Is hire purchase interest a flat rate?
Often, yes. That makes it look cheaper than it is. Convert to an APR and add the balloon and fees before comparing with a loan.
What happens at the end of a hire purchase?
You typically own the asset after a final option-to-purchase fee, or clear a balloon. On a lease you hand it back or re-lease. Check which applies.
Should I finance equipment with a loan instead?
Sometimes a term loan works out cheaper once the flat rate is converted. Compare total cost both ways — the answer depends on the rates, balloon and VAT treatment.
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