01 / The mechanics
How it works
- The funder buys the asset, and you pay for the use of it over an agreed period.
- Under hire purchase you own it at the end; under a lease you generally do not.
- The asset itself is the main security, which is why this route can be open to businesses a term loan is not.
- Insurance and maintenance obligations usually sit with you, and are written into the agreement.
02 / The trade-offs
Who it usually suits
Equipment with a useful life long enough to outlast the agreement.
Where the cost sits
Regular payments across the term, often with a deposit at the start and sometimes a larger final payment.
03 / Look closely
What to watch for
Who owns the asset at the end, balloon payments, and what happens if the asset fails early.
Questions worth asking
- Do I own the asset at the end, and if so at what cost?
- Is there a final balloon payment, and how large is it?
- What happens to my obligation if the asset breaks or is written off?
- Can I settle early, and what is the figure to do so?
04 / Take a step back
Before you commit
If the equipment will be obsolete before the term ends, a shorter lease or an outright purchase from working capital may cost less overall.