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Hire Purchase
Financier purchases the goods and hires them to the customer. When the final payment is made, the 'hirer' owns the goods.
Benefits to Business
- Preserve your working capital - immediate access to vehicles and equipment without paying for them upfront
- No deposit - 100% finance is available to approved customers
- Easier cash flow management - payment terms can be matched to the customer's income
- Won't tie up existing assets - the item being purchased is normally sufficient security for the finance
- Tax benefits - interest and depreciation are potentially deductible
- Balloon payments (a lump sum payment at the end of a contract that settles the debt) can be arranged where customers can pay lower instalments during the term of the contract, then pay a balloon payment at the end of the term.
- There are no ongoing monthly fees or charges
At a glance
| Purpose |
Finance for companies and business professionals who need motor vehicles, trucks, earth moving, agricultural, industrial plant or professional equipment. |
| Payments |
Fixed for the life of the agreement |
| Term |
1-5 years |
| Age of asset |
Motor vehicles - up to 10 years at expiry of facility. Other equipment - age limit based on type of goods and intended use. |
| Minimum |
$8,000 |
| Payment frequency |
Monthly, quarterly, semi-annually, annually, seasonally or irregularly |
| Payment methods |
Direct debit from a bank account, BPAY or cash/cheque deposits via a cash booklet |
| Deposit |
Optional |
| Insurance, Fees and Charges can be financed |
Yes |
| Balloon/ Residual Payment |
Optional |
Taxation
National Capital Finance can give no effective guidance on Tax benefits and National Capital Finance staff must be careful to avoid any suggestion that they or National Capital Finance have given any tax advice. We can state that the customer 'may be able to claim certain tax benefits depending on their circumstances' however they should seek advice from their tax advisor.
GST
- GST is payable only on the initial asset purchase and can be included in the amount financed.
- If the customer holds an ABN and the customer accounts on a cash basis, GST is amortised over the life of the contract and the customer may be able to claim an Input Tax Credit (ITC) each month or quarter.
- If the customer holds an ABN and accounts on an accrual basis, the customer may be able to claim GST upfront on the first day of hire.
- No GST is payable on the repayments, balloon payment, or term charges.
- From a taxation perspective the customer is treated as having acquired the vehicle or equipment from National Capital Finance via a loan at the commencement of the agreement.
Government Duties
- Transaction Duty: Government charge to Finance Company which Finance Company passes on to the customer. Duty is calculated on the monthly payments. GST is payable on the duty and can be claimed as an ITC.
- Exemptions
VIC: An individual, partnership of individuals or sole trader (not an incorporated body) hiring farm equipment or a commercial vehicle.
Vic/NSW/ACT/Tas/Qld: Individuals and corporations hiring aircraft, ship or vessel hires, including engines and other components.
- No stamp duty applies
Policies
- Finance is for business-related assets only.
- Asset finance for equipment must be no older than 5 years from the data of finance, except for passenger and commercial motor vehicles, which must not be older than 10 years at the end of term.
- Age of other assets dependent on type of goods and intended use.
- Not including aircraft (including helicopters), underground mining, charter boats (anything involving people due to issues re: insurance), any boat over $250k or software.
- National Capital Finance requires a declaration of purpose form signed when the customer entity is not a corporation. NB: Recent AFC notice advises that financiers need to take care in accepting customers' signed declarations that goods are for business purposes when other enquiries may lead to a conclusion that the use is non-commercial.
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