Should I buy this equipment on hire purchase or lease it?
Put a hire purchase quote and a lease quote for the same asset side by side: the total you pay, a yearly rate for each, and the cost once you count what the asset is still worth at the end.
With hire purchase you pay a deposit and monthly payments, and the asset is yours after the last payment. With a lease you rent the asset: the provider owns it and you usually hand it back at the end, or keep renting it.
So the monthly payments alone do not tell you which costs less. Under hire purchase you end up owning something that is still worth money. Under a lease you do not. This calculator counts that, using your own estimate of what the asset will be worth when the agreement ends.
It also works out a yearly rate for each quote, using the FCA's APR method: an APR-equivalent for hire purchase, and the rate built into the lease when the asset you hand back is counted as part of what you pay.
Results
| Item | Hire purchase | Lease |
|---|---|---|
| Paid at the start | £3,250 | £2,350 |
| Total you pay | £34,000 | £25,450 |
| At the end | You own it (£9,000) | You hand it back |
| Net cost | £25,000 | £25,450 |
Counting what the asset is worth at the end, hire purchase costs £450 less over the agreement. The result changes with your estimate of the end value, and it leaves out VAT, tax relief and the timing of payments. It is a way to compare quotes, not a provider's offer.
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Worked example: A £30,000 machine over 3 years
A made-up example, not a quote from any provider. All figures are before VAT. The machine is expected to be worth £9,000 after 3 years.
- Price of the asset
- £30,000
- Hire purchase: £3,000 deposit, 36 × £850, fees
- £34,000
- Hire purchase APR-equivalent
- 9.6%
- Less the asset you keep, worth
- £9,000
- Hire purchase net cost
- £25,000
- Lease: 3 + 33 rentals of £700, fees
- £25,450
- Lease rate built in
- 8.5%
- Lease net cost (you hand it back)
- £25,450
The lease's monthly payments are lower, but under hire purchase you keep an asset worth £9,000. Counting that, hire purchase costs £450 less. With a different end value the answer can change.
Worth knowing
- The figures leave out VAT. Under hire purchase, VAT on the asset is usually due when you get it. Under a lease, VAT is charged on each rental. Whether you can reclaim it depends on your VAT registration.
- Tax relief also differs. You generally cannot claim capital allowances on things you lease, unless it is a hire purchase contract or a long funding lease. The calculator leaves tax out; an accountant can explain the effect for your business.
- The value at the end is your estimate, and it decides a lot. Try a lower figure to see how the result changes.
- Under a lease you may also pay for wear and tear, extra use or collection when you hand the asset back. Ask for those terms in writing.
Routes this works for
Sources
- British Business Bank: What is asset finance? · checked 7 October 2026
- HMRC internal manual VATTOS9250: Tax points for hire purchase, credit sales and conditional sales · checked 10 October 2026
- GOV.UK: Claim capital allowances: what you can claim on · checked 10 October 2026
- FCA Handbook, CONC App 1.2: calculation of the annual percentage rate of charge · checked 8 October 2026
Something wrong or out of date?
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