Question 1

What is Commercial Hire Purchase?

Accepted Answer

CHP is a commercial credit facility used by businesses to finance the purchase of assets. It can suit both the accruals and cash methods of accounting, provides an interest rate on par with Chattel Mortgage, and tax deductions via depreciation of the asset.

Question 2

What is the tax benefit of HP Truck Financing?

Accepted Answer

HP provides the main tax benefit when the asset is depreciated in the annual accounts of the business. Depreciation schedules are set by the ATO. Only the interest component of the monthly payments is a tax deduction, not the capital repayment.

Question 3

How does a CHP balloon work?

Accepted Answer

A balloon is a set amount or referenced as a percentage of the amount requested in a loan, which is due to be paid after the last scheduled monthly payment is made. Different balloon amounts affect the monthly payment amount. When the balloon is finalised, the lender releases the security over the asset and the business has complete ownership of the asset.

Question 4

Can all types of businesses use Hire Purchase to buy a truck?

Accepted Answer

All commercial entities with an ABN can apply for all forms of commercial credit including HP. The suitability of any credit facility for a specific entity will depend on that facility meeting the accounting practices and objectives of the business.

Question 5

Is CHP suitable to finance used vehicles?

Accepted Answer

All asset acquisition financing products including CHP may be used to finance second-hand vehicles.

Question 6

Will I own the vehicle if I finance with Hire Purchase?

Accepted Answer

When the borrower finalises all monies owed on a HP loan, including any balloon payment, the lender releases their claim and the business owns the vehicle.

Question 7

What is the cash accounting method?

Accepted Answer

With the cash accounting method, invoices received as accounts payable and invoices issued to clients, are posted into the business accounts when the payment is made or the accounts receivable are received.

Question 8

Will Commercial Hire Purchase cover the full purchase price?

Accepted Answer

Being approved for no deposit financing for CHP is subject to lender approval of the individual application.

Question 9

Is the interest rate on Hire Purchase agreements fixed or variable?

Accepted Answer

Typically, asset acquisition financing including HP is arranged with a fixed rate of interest.

Question 10

Are owner-drivers eligible for HP vehicle financing?

Accepted Answer

All business entities with an ABN, including self-employed operators, can apply for HP. Approval of the application is subject to meeting individual lender criteria.

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