Quick answer
How can you compare hire purchase and leasing fairly?
Use the same equipment specification, usage period and business assumptions. Compare cash at the start, all payments, service obligations and the end position. An arrangement that leaves you owning the asset and one that requires its return need different end-of-term assumptions.
Key points
- Fix the specification before comparing finance.
- Show the ownership outcome alongside the payment total.
- Include the running costs each quote leaves with you.
- Check the process for early change and scheduled return.
Build one specification for every quote
Record the model, required capacity, accessories, delivery, installation, training and intended use. If equipment is used, include its age and condition. Suppliers should be pricing a comparable operating requirement rather than substituting a smaller item to reach a lower monthly number.
For a van, include annual mileage and any fitting work. For a kitchen appliance, include electrical or plumbing work and service cover. This operational detail belongs in the funding comparison because an omitted cost still has to be paid by the business.
Separate ownership from day-to-day responsibility
Hire purchase can lead to ownership after the agreement’s conditions are met; leasing arrangements generally provide use under their stated terms. The British Business Bank outlines these structures in its asset finance guide [1]. Establish the exact position in the proposed agreement.
Now ask who insures, maintains and repairs the item during the term. Ownership does not answer all three questions. If the equipment fails, the business needs to know who organises support, what the service covers and which payments continue while it is unavailable.
Put both proposals on the same worksheet
Use a time period that matches the planned business use. List initial payments, regular instalments, final payments and separate operating costs. State whether the business owns, returns or continues renting the asset at the end. Do not deduct an assumed resale value without saying where that estimate comes from.
If the accountant identifies different tax or VAT timing, add that as a separate scenario based on the actual company and agreement. Keep the basic cash schedule visible so the decision does not depend on an unexplained after-tax total.
| Comparison line | Proposal A | Proposal B |
|---|---|---|
| Equipment and use | Same defined specification | Same defined specification |
| Start payment | Enter cash and date | Enter cash and date |
| Regular payments | Enter schedule | Enter schedule |
| End position | Ownership or return terms | Ownership or return terms |
| Separate costs | Insurance, service, installation | Insurance, service, installation |
Test the date when things change
Consider what happens if the business opens another site, changes its service or needs different equipment before the term ends. Ask the provider for the change, settlement or termination process. A supplier’s promise to take an item back should be checked against the finance company’s separate agreement.
At the scheduled end, record the notice date, return standard, collection cost and any purchase option. Put reminders into the business calendar. The arrangement is easier to assess when the final step is understood before the first payment.
Decide what remains unresolved
Make a short open-questions list rather than filling gaps with optimistic assumptions. Examples include whether installation is included, the warranty response time, who bears an uninsured loss or whether a final option payment transfers title.
Bring that list and the supplier quote to the funding discussion. Felix can help collect the requirement for a broker conversation; it does not decide the accounting treatment or choose an agreement for the company. A clear comparison makes professional advice more specific and useful.
Frequently asked questions
Straight answers
Does the lowest rental mean the lowest cost?
Not necessarily. Compare the same equipment, separate running costs and end position.
Should resale value enter the comparison?
Only as an explicit assumption, with its basis and uncertainty shown. It is not cash available today.
Who checks tax treatment?
Ask your accountant to assess the actual agreement for your company.
Sources and further reading
Where the external facts come from
Sources checked on 27 October 2026. Provider links are references; they do not imply a partnership or an available offer.
- British Business Bank: asset finance ↗
Hire purchase and leasing structures.
