What is a Commercial Hire Purchase (CHP)?

A commercial hire purchase, more commonly referred to as CHP, is as a business finance product wherein the customer hires a vehicle or other asset from the financier, be it a bank or a financial institution, with set monthly repayments in the form of instalments over a predefined term. Generally the term varies from 12 to 60 months. The client may also incorporate an agreed balloon/residual value at term end in line with the likely value of the asset at that time.

CHP may also be referred to as Corporate Hire Purchase, Asset Purchase, Term Purchase and HP.

Advantages of CHP

CHP is a popular option to acquire a motor vehicle or other asset. Some of its attractions are:

• Depreciation on the vehicle is tax deductible, if it is used to generate income or the expense is required in carrying on a business
• Clients on a casg accounting basis for GST must claim the GST component back proportionally across the term of the loan
• Interest charged is tax deductable
• The monthly instalment is fixed over the term of the agreement
• 100% finance available

(Independant professional financial and tax advice must be sought to determine all tax and GST issues)