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Commerical Hire Purchase Finance
Under a Commercial Hire Purchase (CHP) Facility, the financier purchases the asset on behalf of the customer and then the customer hires the equipment back over a set period of time.
A Commercial Hire Purchase Facility also provides tax deductibility for the client.
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Commercial Hire Purchase Finance
Overview of a Commercial Hire Purchase for Truck Finance
The Commercial Hire Purchase (CHP) facility is a common funding structure where the financier purchases the asset—your truck or heavy vehicle—on the customer's behalf. The customer then hires the equipment back over a set period. This structure allows for immediate use of the asset while spreading the cost over its productive life.
A key advantage of the CHP facility is the valuable tax deductibility it provides to Australian businesses. Depending on the client's accounting method, components of the hire payments, such as interest charges and the asset's depreciation, can typically be claimed as deductions against business revenue.
Upon the final payment of the contract, including any residual balloon, ownership of the asset automatically transfers to the client. We specialise in structuring CHP deals with competitive, fixed rates, ensuring predictable budgeting and a seamless path to full asset ownership.
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Asset Security
Features of a Commercial Hire Purchase Facility
- Term of a Commercial Hire purchase can range from 12 months to 84 months
- Fixed interest rate applies
- Ownership of the asset is transferred to the client when the final payment or residual payment has been made by the customer
- Payments can be made weekly, monthly, quarterly, yearly or structured (i.e. agreed payments over different times of the year) Residual payment at the end of the term can be applied to the loan reducing monthly payments
- Client can contribute a deposit towards the purchase (either through trade in or cash) or fund 100% of the cost of the asset
- Depreciation and interest is claimed as a tax deduction at the end of the financial year on customer profit and loss statement reducing tax paid to the ATO
- GST amount on the purchase is claimed as a gst input tax credit over the life of the Commercial Hire facility
Tax Advantages
Benefits of a Commercial Hire Purchase Facility
- Financing a truck or farm machinery using a Commercial Hire Purchase facility as opposed to using own funds, will preserve cash flow to maximise working capital position
- Flexible payment options allow clients to make payments suitable to their cash flow
- Fixed payments allow businesses to accurately project income and expenses going forward
- Option of a residual payment at the end of the term reduces payments over the term of the loan
- Commercial Hire Purchase loans for heavy equipment can be assessed on either a full doc or low doc basis
- As these types of loans use the equipment as security, it allows clients to free up property equity to pursue other investment opportunities
- Residual payment can be paid out at the end of term (by way of trade in or cash payment) or refinanced (by way of a new loan agreement)
- Tax deductibility at end of the financial year
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Start Now and complete our Quick Assessment Form to obtain a Pre-Approval up to $500K – decision within a few seconds.
Alternatively, you can call one of our Finance Consultants to discuss your funding scenario.
Example Breakdown
Example Funding Scenario
- Purchase Price of new DAF Truck and Everdigm Concrete Pump – $650,000 (gst inc)
- Finance Type – Commercial Hire Purchase (CHP)
- Loan Amount – $650,000 (gst inc)
- Term – 60 months
- Residual – 30% or $195,000
- Payments – monthly in arrears
Outcome
- Client could claim $59,090.91(gst amount on the invoice) as an input tax credit on their business activity statements over the life of the loan (calculated $650,000 / 11 = $59,090.91 / 60 months = $984.85 or $2,954.55 per quarter)
- Depreciation and Interest claimed as a tax deduction on the company profit and loss statement – approximate reduction of taxable income by $80,000 – $100,000 (depending on the depreciation method employed by clients accountant)
- The 30% balloon payment reduced payments on the loan over the 5-year period (payments are only calculated on $455,000 – ie purchase price $650,000 less the residual payment $195,000).
- Fixed interest rate allowed client to easily budget for ongoing expenses
Customer Reviews
Our customers say it best. Find out what it's like dealing with the Experts in Truck Finance. You could be the next success story.
Nathan you are fantastic to deal with. Always prompt with deals never a hiccup. After 8 truck deals will never use another broker. Keep up the great work you make my life stress free.
TH
Tracey Hall
Scone Equine Transport Pty Ltd
I have been dealing Heavy Vehicle Finance since 2014 and have found them be nothing short of amazing.They have funded various trucks and trailers for me over the years and its a fantastic feeling to know that I still have the same account manager after all of these years of business.It is very good to know that a finance approval is only a phone call away.
CW
Colin Wallace
Palanquin Pty Ltd
I have used the team at Heavy Vehicle Finance twice now for our financing needs for prime movers and side tippers. A Great team to work with and very prompt and professional. We will use again in the future.
JC
James Coustley
JJC Civil
I have used Nathan and his team for multiple purchases for our earthmoving company and Nathan has gone above and beyond to help us with expanding our business. I couldn’t recommend Nathan more highly.
SW
Sam Wood
Sureflo Plumbing & Roofing Contractors Pty Ltd
We used Heavy Vehicle Finance for the purchase of our Truck. They went above and beyond for us and made sure that the process was as stress-free as possible. The entire interaction was nothing short of amazing. We will definitely be using them again in the future.
MM
Meagan McNicholl
Next Gen Transport Pty Ltd
Can’t thank Nathan enough for how fast and professional he was with organising my finance for my new truck. He was straight to the point with no stuffing around. Highly recommended
TH
Tim Hartas
Hartrax Contracting Pty Ltd
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