Hire purchase is an agreement whereby vehicles are purchased by ŠKODA Finance on behalf of the customer and hired for an agreed term. At the end of the contract period, ownership transfers to the customer on the payment of a purchase installment.
For business and taxation purposes, vehicles acquired under a Non – Consumer Hire Purchase arrangement are treated as fixed assets of the company with the amount being treated as a liability.
A Business can offset the interest element of the Hire Purchase cost against Tax thereby reducing the effective cost of borrowing. The VAT amount on the vehicle can be claimed back from Revenue in one upfront payment at the beginning of the agreement (subject to vehicle qualification rebate). Vat is not normally recoverable on cars.
With Hire Purchase you can defer part of the capital cost until the end of the agreement and pay a final "balloon" payment, thus making the monthly installment more affordable.
Benefits of Non-Consumer Hire Purchase:
• The product is straightforward with no tax implications on completion of the agreement
• Fixed installments provide for more accurate budgeting and forecasting
• By funding vehicles by way of a separate line of credit, working capital is free to be used where it is needed most - in the business
• As well as preserving valuable working capital, HP can provide better cash-flow management and control.
Warning: You will not own these goods until the final payment is made.