FAQ: Who is eligible for a Commercial Hire Purchase, and who do they suit?

Who is eligible for a Commercial Hire Purchase, and who do they suit?

Businesses - including companies, sole traders and partnerships - and individuals are eligible for a Commercial Hire Purchase, providing the vehicle is predominantly used for business (income producing) purposes.

A Commercial Hire Purchase may suit business customers who are registered for GST on either an Accruals or Cash accounting basis, as they can then claim the GST in the purchase price of the car as an Input Tax Credit on their next BAS, and GST on any interest charged as Input Tax Credits progressively over the life of the loan.

It is important to note that the GST treatment Commercial Hire Purchases changed on 1 July 2012, making them significantly less attractive for individuals with a car allowance, and potentially less attractive for businesses.

As an alternative option, a Chattel Mortgage offers very similar benefits to those which a CHP offered prior to 1 July 2012, and Chattel Mortgages are not subject to the same GST changes that affected Hire Purchases. Another consideration is whether the customer prefers to lease the vehicle rather than own it, in which case a Car Lease (Finance Lease) may be more appropriate.