Side-by-side comparisons of every UK asset finance product, plain-English VAT treatment and deposit guidance — with a clear recommendation at the end.
The three core structures compared on the points that actually matter for SME cash flow, tax and ownership.
| Feature | Hire Purchase | Finance Lease | Refinance |
|---|---|---|---|
| End-of-term ownership | Yours for nominal fee | Lender retains title | Yours throughout |
| Typical deposit | 10–20% | 0% (or 1–3 advance rentals) | None — equity release |
| VAT treatment | Paid upfront, reclaimed | Spread across rentals | On rental stream |
| Tax deductibility | Capital allowances + interest | Full rental expensable | Full rental expensable |
| Shows on balance sheet | Yes | Under FRS 102 / IFRS 16: yes | Yes |
| Best for kit you'll keep | Yes | No | Yes |
| Best for kit you'll upgrade | No | Yes | No |
| Releases cash from owned kit | No | No | Yes |
| Typical term | 2–7 years | 2–5 years | 1–5 years |
| Indicative flat rate | From 6.4% | From 6.9% | From 7.2% |
Outcome
Choose Hire Purchase
…if ownership matters and you'll keep the asset for its useful life. Best post-tax outcome on long-life hard assets.
HP guideOutcome
Choose Finance Lease
…if you'll upgrade in 3–5 years, want lower rentals, or need to spread the VAT impact across the term.
Lease guideOutcome
Choose Refinance
…if you already own valuable kit and need working capital without a debenture or PG on the wider business.
Refinance guideVAT is rarely a deal-breaker — but the cash-timing difference between paying it upfront and spreading it across rentals can be material on a £100k+ deal.
| Scenario | Upfront VAT | Reclaim | Net cash impact |
|---|---|---|---|
| £60k machine on Hire Purchase | £12,000 due on day one | Reclaim in next VAT return (up to 3 months) | Short-term cash hit, then neutral |
| £60k machine on Finance Lease | £0 — VAT only on rentals | 20% VAT on each rental, reclaimed quarterly | VAT cash impact spread across the term |
| £60k Sale & Leaseback | VAT-neutral if you originally reclaimed it | 20% VAT on each rental, reclaimed quarterly | Capital released without a fresh VAT bill |
| Vehicle (commercial van) on HP | £VAT on full asset value upfront | 100% reclaim if business-use only | Standard treatment for commercial vans |
| Car on Finance Lease | VAT on rentals only | Only 50% reclaim on rentals (mixed use rule) | Lease usually beats HP for cars |
Cash-flow tip
If you're VAT-registered and trade B2B, the choice between HP and Lease for VAT is mostly about cash timing, not absolute cost.
Cars are different
VAT on car rentals is only 50% reclaimable. That usually tips passenger cars towards lease over HP. Vans and other commercial vehicles get 100% reclaim.
Margin scheme kit
Used assets sold under the VAT margin scheme can't have their VAT reclaimed at all. We flag this on quote.
Indicative ranges — final terms depend on the asset, your trading history and the lender. Strong covenants and hard assets push deposits down; younger businesses or soft assets push them up.
| Profile | Hire Purchase | Finance Lease | Refinance |
|---|---|---|---|
| Established (3+ yrs trading, clean credit) | 10% | 0% or 1 rental in advance | N/A — equity-based |
| Younger business (1–3 yrs) | 15–20% | 1–3 rentals in advance | N/A — equity-based |
| Adverse credit / CCJ | 20–30% | 3–6 rentals in advance | Subject to asset valuation |
| Soft asset (IT, fit-out) | 15–25% | 1–3 rentals in advance | Up to 60% LTV |
| Hard asset (plant, vehicles) | 10% | 0–1 rental in advance | 70–90% LTV |
Lower the deposit
Five levers we pull
Worked example
£80k tipper truck, 5 years
If you said…
"I want to own it outright"
You'll keep the asset for years and want full ownership at end of term — typical for plant, machinery, commercial vehicles you'll run for their whole working life.
Recommended
Hire Purchase
Fixed monthlies, clear path to ownership, capital allowances against profit.
If you said…
"I'll upgrade it in 3–5 years"
The kit will be obsolete or replaced before its end-of-life — typical for IT, audio-visual, medical scanners, kitchen equipment.
Recommended
Finance Lease
Lower rentals, no obligation to buy, easy upgrade path. Full rental expense against profit.
If you said…
"I want to free up cash from kit I already own"
You own machines, plant or vehicles outright and need working capital — without a debenture or personal guarantees on the wider business.
Recommended
Refinance / Sale & Leaseback
70–90% LTV on hard assets, cash in 5–10 days, you keep using the kit.
If you said…
"I'm not sure which fits"
Most businesses split their funding: HP for the keepers, lease for the upgraders, refinance when working capital tightens.
Recommended
Take the eligibility quiz
Six questions, two minutes, a tailored recommendation and indicative pricing.
Our eligibility quiz matches your asset, term and trading profile against 60+ specialist lenders and tells you which product — and lender type — fits best.
