Commercial Hire Purchase for Trailer Finance

Under a commercial hire purchase (CHP), the lender buys the trailer and hires it to your business. You make regular payments, and ownership passes to you when the final payment, including any balloon, is made.

How it compares

• Chattel mortgage: you own the trailer from the start and the lender takes security over it. Under CHP, the lender owns it until the end.
• Finance lease: the lender owns the trailer and you can choose whether to buy it at the end. Under CHP, you're committed to buying it.

GST and tax

For GST-registered businesses, the GST on a hire purchase can generally be claimed upfront, much like a chattel mortgage. The interest and depreciation are generally deductible, because you're treated as the economic owner. Your accountant can confirm how this applies to you.

Is it still common?

CHP is used less than it once was, because a chattel mortgage gives a similar outcome with simpler ownership. Some lenders and some businesses still prefer it, for accounting or policy reasons. If your accountant recommends hire purchase, a broker can arrange it with a lender that offers it.

See chattel mortgage vs finance lease for a side-by-side comparison of the two main options.