Hire Purchase Options
Hire Purchase (HP) – Fixed rental agreement over a fixed period with an Option to Purchase (OTP) fee at the end of the agreement. Customer takes title of asset once last payment is made.
HP with a residual payment – Mirrors HP agreement, however before you pay the OPT fee there is a lump sum payment known as a balloon payment. The customer is responsible for this payment. Only available on certain assets.
Sale & HP Back – Mirrors HP agreement, however you (customer) will already have purchased the asset and the bank/funder will pay you back the money and the HP kicks in.
Re-finance on HP – Mirrors HP agreement, however you are releasing capital against an asset that you (customer) already owns.
Hire Purchase regulation
The differences between regulated and unregulated Hire Purchase
Suitable Customers
Regulated
• UK Based customers
• Sole Traders purchasing an asset under £25k
• Partnerships (3 or less individuals) purchasing an asset under £25k
• Membership clubs or Trusts purchasing an asset under £25k
• Individual / Director purchasing a vehicle for personal or business use (including High net-worth individuals (HNWI*) purchasing a vehicle under £60,240)
• *(High net worth individual – someone who earns more than £150k per annum or net assets exceeds £500k)
• Over 18 years
• Customers with the ability to repay the agreed rentals.
• Customers who can make payments via direct debit
Unregulated
• UK Based customers
• Sole Traders purchasing an asset over £25k
• Partnerships (3- individuals) purchasing an asset over £25k
• Partnerships (4 + individuals)
• Limited companies. Limited Liability Companies PLCs
• High Net Worth Individual – Asset over £60,240
• Over 18 years
• Customers with the ability to repay the agreed rentals.
• Customers who can make payments via direct debit.
Product Purpose
Regulated
The purpose of these products is to provide finance for identifiable equipment, allowing customers to spread the cost of the asset purchase. Predominately supporting agricultural, golf, industrial, construction, haulage & logistics, professionals, IT and many more.
Re-finance helps to release capital to support businesses expansion or restructuring, MBO / MBI, acquisitions, consolidation of existing agreements to reduce monthly outgoings, provide capital injections to boost cash reserves.
Unregulated
The purpose of these products is to provide finance for identifiable equipment. Predominately supporting agricultural, golf, industrial, construction, haulage & logistics, professionals, IT and many more. Releasing capital to support businesses expansion or restructuring, MBO / MBI, acquisitions, consolidation of existing agreements to reduce monthly outgoings, provide capital injections to boost cash reserves.
Product Characteristics & Benefits
Regulated
• Terms from 12 months – 72 months, some assets will allow up to 120 months. Heavy commercial or leisure assets may have different terms. 6 months for fertiliser.
• Monthly, quarterly, half yearly & annual payment profiles allowed.
• Offers all the benefits of ownership without the initial capital outlay.
• You will get immediate and unlimited use of the asset.
• Fixed rentals and flexible payment structures allow businesses to match income and expenditure cycles.
• Prime location of the asset must be in the UK
• Balloon payments can reduce the rental costs (Only available on certain assets)
• Ability to finance the balloon payment at the end of the agreement.
• If you are classed as a HNWI you may be asked to prove your HNWI status
• *(High net worth individual – someone who earns more than £150k per annum or net assets exceeds £500k)
Unregulated
• Terms from 12 months – 72 months, some assets will allow up to 120 months. Heavy commercial or leisure assets may have different terms. 6 months for fertiliser.
• Monthly, quarterly, half yearly & annual payment profiles allowed.
Offers all the benefits of ownership without the initial capital outlay.
• You will get immediate and unlimited use of the asset.
• Fixed rentals and flexible payment structures allow businesses to match income and expenditure cycles.
• Prime location of the asset must be in the UK
• Balloon payments can reduce the rental costs (only valid on specific assets)
• Ability to finance the balloon payment at the end of the agreement.
• Re-finance allows you to release capital against assets the business already owns
Pricing & Fees
Regulated
• Fixed pricing, interest bearing over a fixed period.
• Variable deposits and balloons can vary the monthly repayments in line with company income.
• VAT is paid upfront in most instances; some banks allow VAT deferrals for up to 3 months or spread the VAT over the term.
• The agreement may be settled, partially or in full, at any time throughout the term (sometime fees may apply).
• Upfront processing fees may apply. Option to purchase fee may apply.
• Charges may apply if you miss any payments. See below.
• Right to withdraw within 14 days applies
• Voluntary Termination available
• If you select to have a balloon payment, you are responsible for this payment.
• Lump sums throughout the life of the agreement may be able to be paid to some funders and rentals recalculated for the remaining term. It does not reduce the term, just the rental amounts.
• Commission is paid to the broker for this type of introduction, if you wish to know more email compliance@peregrinefinance.co.uk
Unregulated
• Fixed pricing, interest bearing over a fixed period.
• Variable deposits and balloons can vary the monthly repayments in line with company income.
• VAT is paid upfront in most instances, there is the option however to defer the VAT for up to 3 months or spread the VAT over the term.
• The agreement may be settled, partially or in full, at any time throughout the term (sometime fees may apply).
• Upfront processing fees may apply.
• Option to purchase fee may apply.
• Charges may apply if you miss any payments.
• If you select to have a balloon payment, you are responsible for this payment.
• Commission is paid to the broker for this type of introduction, if you wish to know more email compliance@peregrinefinance.co.uk
Risks & Considerations
Regulated
• Missed payments may impact the customers credit rating and result in the asset being repossessed.
• Ownership of the assets remains with the funder until all payments have been made.
• After the withdraw period, customers cannot cancel the agreement without settling off the outstanding payments, fees may apply.
• Not suitable if you want to trade in your asset at the end of the term for a new asset (consider lease options)
• Not suitable for retail consumers.
• Additional Security maybe requested by the finance company such as a personal or company guarantees.
• Additional charges could apply;
– Late payment fees
– Direct debit represented fees
– Settlement charges (standard or new business)
– Termination fees
– Novation charges
Unregulated
• Missed payments may impact the customers credit rating and result in the asset being repossessed.
• Ownership of the assets remains with the funder until all payments have been made.
• Not suitable if you want to trade in your asset at the end of the term for a new asset (consider lease options)
• Not suitable for retail consumers.
• Additional Security maybe requested by the finance company such as a personal or company guarantees.
• Additional charges could apply (some are listed below)
– Late payment fees
– Direct debit represented fee
– Settlement charges (standard or new business)
– Termination fees
– Novation charges
Vulnerability
Regulated
Our customers come first. We want to ensure that you fully understand what you are agreeing to.
If you require additional support, you must make your broker aware so they can offer the most suitable support.
Unregulated
Our customers come first. We want to ensure that you fully understand what you are agreeing to.
If you require additional support, you must make your broker aware so they can offer the most suitable support.
