Compare finance types
Hire purchase vs Operating lease: which is right for your business?
The main difference between a hire purchase and a operating lease is how they are secured and repaid: a hire purchase suits businesses wanting eventual ownership where a lender or accountant specifically prefers this structure, while a operating lease suits businesses replacing equipment on a fixed cycle who want no residual or resale exposure.
Hire purchase vs Operating lease at a glance
| Hire purchase | Operating lease | |
|---|---|---|
| What it is | Hire purchase is an asset finance structure where the financier buys the asset and hires it to your business for a fixed term, with ownership transferring automatically once the final instalment — including any balloon — is paid. It sits between a lease and a chattel mortgage, and is used less often in Australia since GST reforms favoured the chattel mortgage. | An operating lease is a rental agreement where the financier owns the asset, carries the residual value risk and leases it to your business for a fixed monthly payment over an agreed term. At the end you simply hand the asset back, with no residual to pay and no resale to manage. |
| Amount | $10,000 – $2,000,000 | $10,000 – $2,000,000 |
| Term | 12–84 months | 12–60 months |
| Indicative rate | 7% – 14.9% p.a. | 7.5% – 15% p.a. |
| Rate type | Fixed | Fixed |
| Security | Secured by the asset | Secured by the asset |
| Repayments | Monthly | Monthly rental |
| Typical speed | 24–72 hours for low-doc, longer for full-doc | 2–5 business days |
| Best for | Businesses wanting eventual ownership where a lender or accountant specifically prefers this structure | Businesses replacing equipment on a fixed cycle who want no residual or resale exposure |
| Consider the other if | Most GST-registered businesses, where a chattel mortgage usually delivers a better GST outcome | Long-life assets you intend to keep and own outright |
| Tax | Interest and depreciation are generally claimable, and GST treatment differs from a chattel mortgage. Confirm with your accountant before choosing. | Rentals on business-use assets are generally deductible as an operating expense and GST is charged on each payment. Confirm with your accountant. |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a hire purchase
A hire purchase is usually the better fit for businesses wanting eventual ownership where a lender or accountant specifically prefers this structure. Its main advantages are ownership transfers automatically on the final payment, fixed instalments with an optional balloon, secured pricing, well below unsecured lending. Consider the alternative if most gst-registered businesses, where a chattel mortgage usually delivers a better gst outcome.
When to choose a operating lease
A operating lease is usually the better fit for businesses replacing equipment on a fixed cycle who want no residual or resale exposure. Its main advantages are no residual to pay and no resale risk at term end, fixed, predictable monthly cost, simple upgrade path onto newer equipment. Consider the alternative if long-life assets you intend to keep and own outright.
Hire purchase
Hire purchase is an asset finance structure where the financier buys the asset and hires it to your business for a fixed term, with ownership transferring automatically once the final instalment — including any balloon — is paid. It sits between a lease and a chattel mortgage, and is used less often in Australia since GST reforms favoured the chattel mortgage.
Operating lease
An operating lease is a rental agreement where the financier owns the asset, carries the residual value risk and leases it to your business for a fixed monthly payment over an agreed term. At the end you simply hand the asset back, with no residual to pay and no resale to manage.