While Business Contract Hire (BCH) - aka a business lease - is the most common way to secure a vehicle with Select Car Leasing, other finance options are available. Just speak to one of our expert consultants to find out more.

And here we explain everything you need to know about one of those options: Business Hire Purchase (BHP), which is a way to ultimately own a vehicle by making monthly, bite-sized payments.

What is Business Hire Purchase (BHP)?

Business Hire Purchase (BHP) is a common method of financing a vehicle for businesses, and it sits apart from the business leasing, or the Business Contract Hire (BCH), model.

The clue as to BHP’s main feature is the word ‘Purchase’ - as unlike leasing, you get to own and keep the vehicle once all payments have been made, without having to pay the full purchase price upfront. It allows for the gradual ownership of an asset, spreading the cost over a number of years and making payments more manageable.

A business makes regular payments over a fixed period, typically monthly. Those payments cover the entire cost of the vehicle, as well as interest charges.

Benefits of Business Hire Purchase (BHP)

Fixed, regular payments to help you budget:

The remaining cost of the vehicle, plus interest, is spread out over a fixed term, often ranging from one to five years. Monthly payments are calculated based on the purchase price, the down payment, and the interest rate.

End of contract peace of mind:

There’s no large final ‘balloon’ payment with a Business Hire Purchase (BHP) agreement. The cost of the vehicle, as well as interest, is spread throughout the monthly payments.

You ultimately get to own the vehicle:

Once all the payments, including interest, are completed, the ownership of the vehicle is transferred to the business.

Tax Benefits:

Businesses can often claim tax deductions on the interest and depreciation of the vehicle, making BHP an attractive financing option.

Drive new:

With BHP you get to drive a brand new car, complete with modern driving assistance and safety aids, while making the monthly payments. You then get to fully own the vehicle once the agreement is complete.

Things to consider with Business Hire Purchase (BHP):

The lender holds legal ownership of the vehicle:

This lasts for the duration of the agreement until all payments, including interest, are completed.

Business Hire Purchase (BHP) differs from Business Contract Purchase (BCP):

With BCP, the business has the option to purchase the vehicle at the end of the contract term, but it does not automatically gain ownership during the contract, unlike with BHP.

A down payment is required:

With BHP a business may need to pay a percentage of the vehicle's cost upfront, which can vary depending on the lender and the specific terms of the agreement.

Monthly payments:

The regular payments with a Business Hire Purchase (BHP) agreement are generally higher than those in a Business Contract Purchase (BCP) because they cover the full cost of the vehicle and there’s no final balloon payment.

Interest rates may play a key factor:

The interest rates for BHP agreements can be fixed or variable, depending on the terms of the contract and the lender's policies. Fixed rates provide predictability in monthly payments, while variable rates may change based on market conditions.

Tax implications:

VAT (Value Added Tax) may be applicable on the full purchase price of the vehicle in a BHP agreement.

Maintenance and Insurance:

The business is typically responsible for maintaining the vehicle and arranging for insurance coverage during the term of the agreement.

Early Termination:

Depending on the contract, some lenders may allow for early termination or settlement of the agreement, but this might involve additional fees or penalties.

If you'd like to speak with our friendly team about business vehicle leasing, simply call 0118 920 5130 or email us at: enquiries@selectcarleasing.co.uk

We've got business car leasing covered from every angle

If you're thinking about business car leasing, we have a collection of informative guides on all aspects of business leasing to make the process as simple as possible.

Guide

Business Car Leasing Explained

More and more businesses now choose to lease rather than buy their cars, vans and fleet vehicles, and this number continues to grow year on year. Today, corporate leasing alone (not including business types such as SMEs, the self-employed and sole traders) accounts for over 2 million vehicles in the UK.

Guide

Business Car Leasing vs Buying

If you’re unsure whether it’d be better for your business to lease its next new car or instead to buy it, then read on because our business vehicle leasing vs. buying guide explains everything you need to know and consider before you make this important decision.

Guide

Is Business Car Or Van Leasing Right For My Business?

Business car and van leasing offers many distinct benefits, however, there are some situations where it may not be right for your business just now. To help you decide, we’ve put together a list of factors to help point you in the right direction.

Information is provided as a guide only. Select Car Leasing cannot be held responsible for any personal or business decisions made as a result of information provided in the guides. As with all aspects of taxation, it is the responsibility of individuals and businesses to understand the rules and regulations and act accordingly. As personal and business circumstances can vary, it is also advised that you take professional accounting advice before making a final decision.

Business Hire Purchase (BHP) Explained