Overview: the short answer
Hire purchase (also called Commercial Hire Purchase or CHP) is a business finance agreement where the lender buys the asset and you “hire” it over a fixed term. You make regular repayments (with interest). At the end — after the final payment or balloon — legal ownership transfers to you.
- Term: commonly 2–5 years
- Deposit: optional (subject to credit and lender policy)
- Balloon: allowed to lower repayments
- Tax: you generally claim interest and depreciation (not the full repayment)
- GST: most GST-registered businesses can claim the full GST on the asset price upfront
Step-by-step: how a hire purchase works
- Choose your asset and supplier (new or used, subject to lender rules).
- Apply with basic business details, asset quote and trading information.
- Credit assessment and approval with confirmed term, rate, fees and any balloon.
- Documents issued for signing; lender liaises with supplier for invoice.
- Settlement: lender pays the supplier; you take delivery and start repayments.
- Repayments: fixed monthly (or seasonal) over the agreed term.
- End of term: pay the final instalment and any balloon; title transfers to you.
- Options: refinance the balloon, upgrade the asset, or sell if it suits the business.
Structure and costs to expect
- Amount financed: asset price minus any deposit or trade-in.
- Interest: usually fixed for the term; pricing reflects credit strength and asset.
- Fees: documentation, monthly account, and potential payout fees vary by lender.
- Balloon (residual): optional lump sum at the end to reduce repayments during the term.
- Security: lender registers a PPSR security interest over the asset.
- Early payout: available; check break costs and fee policy first.
Related details:
GST and tax treatment in Australia
- GST: For agreements from 1 July 2012, most GST-registered businesses can claim the full GST on the asset price upfront once a valid tax invoice is issued. Interest generally has no GST.
- Tax deductions: Typically you claim interest plus depreciation on the asset (not the full repayment). Accelerated depreciation rules may apply if available.
- Accounting: Many businesses recognise the asset on balance sheet during the term and depreciate it, with a liability for the HP.
This is general information only. Speak with your accountant for advice specific to your business.
Deep dives:
Eligibility and documents
What lenders look at:
- Time in business, ABN/GST registration, and trading performance
- Credit history and existing commitments
- Asset type, age and resale profile
- Requested term, deposit and any balloon
Common documents:
- Driver licence and business details
- Supplier quote/invoice and asset specs
- Bank statements and financials (varies by amount and profile)
- Insurance details before settlement
Learn more:
Worked example
Example only (not a quote):
- Asset price (incl. GST): $66,000
- GST claimable upfront (if eligible): $6,000
- Amount financed (no deposit): $66,000
- Term: 4 years with a $15,000 balloon
- Result: lower monthly repayments during term, with $15,000 due at the end (pay or refinance). You’d generally claim interest plus depreciation over the term.
When hire purchase is a good fit — and the alternatives
- Good fit when you want eventual ownership, predictable repayments, and the option for a balloon.
- Consider a Chattel Mortgage if you want title at settlement with similar tax outcomes.
- Consider a Finance Lease or Operating Lease if off‑balance‑sheet style rentals or simple upgrade paths matter more.
Helpful comparisons:
Get tailored help with hire purchase
Have questions about how hire purchase works for your asset, deposit, balloon or tax position? Send an enquiry and our Australian team will reply within 1 business day.
Frequently asked questions
How does hire purchase work in Australia?
The lender buys the asset, you hire it over a set term with fixed repayments, and you take ownership after the last payment (including any balloon). It’s designed for businesses that want to end up owning the asset.
Do I own the asset during the term?
Not legally. The lender holds title during the term, and title transfers to you after the final payment. You usually show the asset on your balance sheet and claim depreciation during the term.
Is GST on hire purchase claimable upfront?
Generally yes for agreements from 1 July 2012. Most GST-registered businesses can claim the full GST on the asset price upfront with a valid tax invoice. Interest typically has no GST. Confirm with your accountant. See Hire Purchase GST Treatment.
Do I always need a deposit?
No. Many deals can be approved with little or no deposit depending on credit strength, asset type and lender policy. Learn more: Minimum Deposit for Hire Purchase.
What happens if I want lower repayments?
You can add a balloon to reduce repayments, then pay or refinance the balloon at the end. See Hire Purchase Balloon Payment.
How fast can I get approved?
Simple purchases can be approved quickly once documents are in order, often within 24–72 hours. Timelines vary by lender and file. See Hire Purchase Approval Time.
Is hire purchase right for every business?
No. Suitability depends on the asset, cash flow, tax position and end-of-term goals. Compare: Lease vs Hire Purchase and Chattel Mortgage vs Hire Purchase.
Final takeaway
In simple terms, this is how hire purchase works in Australia: the lender buys the asset, you use it and repay it, and title transfers to you at the end. The value comes from shaping the term, deposit and balloon to your cash flow — and understanding GST and tax up front.
If you want help making those choices, reach out and we’ll walk you through the options.