HP vs lease vs cash calculator

Hire purchase and leasing both spread the cost of a business asset, but they treat ownership differently. With hire purchase, payments are spread over an agreed term and there is usually a path to ownership once the agreement and any final fee are completed. A deposit or initial payment may be required. With a lease, the business makes periodic payments to use the asset; whether it can own the asset at the end depends on the lease structure.

Paying cash is the third comparison: the full purchase price leaves the business on day one. There is no finance agreement and no interest, but working capital is reduced immediately.

This HP vs lease calculator compares those three routes for a UK business asset. Accounting and tax treatment can differ by structure, company and asset — the figures here are illustrative and are not tax or accounting advice.

Businesses typically compare hire purchase and leasing when buying equipment, machinery, vehicles or other assets that will be used over several years. The choice is often about cash timing and ownership, not only the monthly payment.

Hire purchase may be considered where the business wants to work towards owning the asset. Leasing may be considered where the priority is use of the asset, a lower initial outlay, or replacing the asset at the end of a term. Cash purchase may cost less in total if the business can spare the funds.

For the product category behind these structures, see asset finance. For a worked equipment example, read CNC machine finance.

The calculator estimates hire purchase payments on the financed amount after any deposit, lease rentals on the full asset cost, and a single cash purchase outflow. Where you include after-tax modelling, it applies representative UK corporation tax relief — capital allowances on purchase and hire purchase, HP interest deductions, and lease rental relief — using the profit band you select.

You can edit asset cost, deposit, APR, term, new or used status and VAT-registration assumptions so the comparison matches a quote you already have. Hire purchase uses standard amortisation after the deposit. Lease rentals use the same formula on the full asset cost with no deposit. Cash is a day-one outflow with capital allowance relief only.

Tax relief on HP interest is applied in proportion to interest accrued each year. Lease rental relief follows the same annual pattern. Figures are ex VAT. If the business is VAT registered, recovery timing can differ between HP and leasing — an on-page note appears when you toggle VAT registration.

End-of-term option fees, residual values, maintenance packages, early-settlement charges and lender arrangement fees are not modelled. Operating leases and contract hire can differ from the finance-lease approach used here.

Tax relief timing is modelled at a representative point — the end of the accounting year plus nine months to payment — so you can see cash timing as well as totals. Eligibility for full expensing or the Annual Investment Allowance depends on the company, the asset and current HMRC rules. Confirm treatment with your accountant before relying on any figure.

A company buying a £50,000 new machine on 60-month HP at 9.9% APR with a 10% deposit and profit in the £50k–£250k band might pay about £954 per month on £45,000 financed. After capital allowances and interest relief at 26.5%, the net all-in HP cost is materially higher than paying cash — but cash ties up £50,000 immediately.

Run your own asset cost, term and rates above. Then use Get my exact figure to pass your inputs to Tera — we compare options from our lender panel with no broker fee to you.