Hire purchase: how it works for business equipment and cars

Who offers hire purchase, and on what terms?

The published terms below were checked on each lender's own page on 30 September 2026 (NAB from our business vehicle loans guide). Rates are set for each business and asset, so none is shown; terms change without notice.

How does hire purchase work?

The lender buys the asset you choose and hires it to your business for regular instalments over an agreed term. You use and maintain it as if you owned it, and you insure it: ANZ requires the asset to be insured at your cost, with its interest noted on the policy. When the final payment, including any balloon, is made, ownership transfers to your business automatically.

The instalments are usually fixed for the term. BOQ publishes equal monthly rentals in advance or arrears, seasonal rentals at nominated intervals, and a balloon at the end that you can pay or re-hire.

How is hire purchase taxed?

GST: claimed up front since July 2012

The ATO treats a hire purchase agreement entered into on or after 1 July 2012 as a single purchase. Every component, including the credit charges and fees, is a taxable supply, and a GST-registered business claims the whole GST credit up front, in the period of the first payment or the tax invoice, whether it accounts for GST on a cash or non-cash basis. BOQ publishes that the GST is included in the amount financed. The idea that hire purchase spreads the GST over the instalments only applies to agreements made before July 2012.

Income tax: treated as a sale and a loan

For income tax, the ATO treats a hire purchase as a notional sale of the asset to you, financed by a notional loan from the lender. You are treated as the owner, so you claim depreciation for the business-use share, and you deduct the notional interest in each payment. Westpac's page draws the same line: interest and depreciation under a loan or hire purchase, rental instalments under a lease.

Is hire purchase better than a loan?

Against a chattel mortgage, the loan most businesses use for equipment, there is little between them for a GST-registered business: the GST timing and the deductions are the same. The differences are practical.

• Title. A chattel mortgage makes you the owner from day one; under hire purchase the lender owns the asset until the last payment.
• GST on the credit charges. All of a hire purchase agreement carries GST, including the interest, which a registered business claims back but an unregistered one cannot. A chattel mortgage's interest carries no GST.
• Lender preference. Some lenders prefer hire purchase for particular asset classes or for new entities; ANZ and BOQ publish both.

Against an unsecured business loan, hire purchase usually costs less: unsecured business loans carry higher rates because the lender has no specific asset to claim if you default.

Is hire purchase on a car a good idea?

For a business vehicle it can be: fixed repayments, ownership at the end, the GST claimed up front and depreciation and interest deducted, the same tax result as a chattel mortgage. On a passenger car, the car limit caps the GST credit at $6,353 and the depreciable cost at $69,883 for 2026-27; a ute or van built to carry a tonne or more is outside it. For a car used privately, a consumer car loan is the usual product, and our car loan guides cover it.

What are the disadvantages of hire purchase?

• You do not own the asset until the last payment, so you cannot sell it freely during the term.
• The asset is the security: if you miss payments, the lender can repossess it.
• Early exit can cost money: ANZ publishes that early repayment fees, which may be significant, may apply.
• A balloon, if you take one, has to be paid, refinanced or re-hired at the end.
• A business not registered for GST pays GST on the credit charges without claiming it back.
• You insure and maintain the asset at your own cost.

When does hire purchase suit a business?

• Income that arrives in seasons: BOQ publishes seasonal rentals and PACCAR Financial payments matched to seasonal cash flow.
• Equipment that takes months to install: BOQ publishes interest-only payments during installation in the first 3 to 6 months.
• You want to own the asset at the end without a residual decision.
• The lender prefers it for your asset class or your entity.