A traditional method of finance where after all the payments have been made, the business becomes the owner of the vehicle, either automatically or on the payment of an option to purchase fee.

For tax purposes, from the beginning of the agreement the business is treated as the owner of the vehicle and so can claim capital allowances. The business will be responsible for maintenance of the vehicle.

As Hire Purchase, however, by arranging a ‘Balloon Payment’ or lump sum payment at the end of the contract, it reduces the monthly repayment quite considerably.