Commercial Hire Purchase
A Commercial Hire Purchase (CHP) is where a customer hires a vehicle from a financier for a fixed monthly repayment over a set period of time.
Alternative names for a Commercial Hire Purchase include Corporate Hire Purchase (CHP), Hire Purchase (HP), Term Purchase (TP) or Offer To Hire.
How does CHP work?
Under a Chattel Mortgage, a financier advances funds to a customer in order to purchase an asset. The customer takes ownership of the asset at the time of purchase and an invoice is made out to customer. The financier then takes a mortgage over the asset as security for the loan by registering a Fixed Charge with ASIC. Once the contract is completed, the charge is removed to give the customer clear title to the asset.
Benefits of a CHP
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Flexible contract terms ranging from 12 to 84 months.
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A balloon payment can be applied to the contract.
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Fixed interest rate.
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Fixed monthly repayments.
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Costs are known in advance.
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A deposit (either cash or trade-in) may be used.
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No GST is charged on the monthly repayments or balloon payment.
Who does a CHP suit?
A Commercial Hire Purchase is suitable for companies, partnerships and sole traders.
Tax implications of a CHP
Where the hirer is registered for GST, they can apply Input Tax Credits to claim some or all of the GST contained in the purchase price of the vehicle/equipment. Under Commercial Hire Purchase, the customer can claim the interest charges on the contract and depreciation according to the ATO guidelines. A tax deduction is available when the vehicle is used for business purposes.
Translease Pty Ltd strongly recommends that before entering into any facility that you obtain specific taxation, accounting and legal advice as to the implications and effect of entering into that transaction having regard to your own individual circumstances. You acknowledge that we are not providing you with any such advice.