Commercial Hire Purchase (CHP)

Unlike a lease the asset is owned by you and when your accountant is doing the tax returns they will claim the interest on the loan contract and the depreciation on the asset. Choosing between leasing and CHP is sometimes difficult and a test which help is which gives the best tax deductions during the term of the loan contract. For example items with high depreciation rates may give better tax deductions than a lease payment.

Like a lease CHP contracts can have Balloon or Residual payments at the end of the contract term. When you finance with a CHP contract you get to claim the GST when you lodge the BAS statement

Warning: Remember the larger the balloon you have in the loan contract the lower the repayments. The repayments may then be insufficient to ensure that the loan balance comes down as fast the value of the asset. So if you lease a car which does a high number of  kilometers each year you may have a car which is worth less than what you owe at the end of the term so you need to add money to the loan to pay out.