Commercial Hire Purchase Explained: How It Works, Rates & Who It Suits

Key highlights

• The lender owns the vehicle during the term; you take title at the end
• Fixed repayments make budgeting predictable across the whole term
• GST is generally not charged on repayments, only on the underlying price
• A residual can be set to lower monthly outgoings on your fleet
• Suits businesses wanting eventual ownership without owning from day one

What commercial hire purchase means

Under a commercial hire purchase, the lender purchases the vehicle you have chosen and then hires it to your business over an agreed term. You get full use of the car, ute or van from settlement, but legal ownership stays with the lender until the contract ends. When you make the final payment, including any residual amount you agreed at the start, title passes automatically to your business. It is effectively a path to ownership by instalments. CHP predates the chattel mortgage as the traditional business vehicle product, and while chattel mortgages have become more common, hire purchase still suits businesses whose accounting or preference favours delayed ownership.

How CHP differs from a chattel mortgage

The practical difference is who owns the vehicle during the term. With a chattel mortgage your business owns the vehicle immediately and the lender holds security; with hire purchase the lender owns it until you have paid it out. This affects the GST and accounting treatment, so it is worth a conversation with your accountant. Broadly, with CHP the GST is captured in the vehicle price rather than added to repayments, and the interest and depreciation components may be deductible where the vehicle is used for business. Both products can carry a residual and both end with you owning the asset, but the ownership timing and the way each sits on your books is the key distinction to weigh up.

Fixed repayments and residual options

One reason businesses like hire purchase is certainty. Repayments are fixed for the full term, so you know exactly what leaves the account each month regardless of what happens to interest rates. That predictability makes it easier to price jobs and manage a fleet budget. You can also set a residual, a lump sum payable at the end, which lowers the regular instalments by leaving part of the vehicle's value to settle later. A larger residual eases monthly cash flow but leaves more to pay at the finish; a smaller or nil residual costs more each month but clears the debt as you go. We help you model the balance that fits how your business earns.

Who commercial hire purchase suits

CHP suits established businesses and sole traders who want to end up owning the vehicle but prefer the lender to hold title along the way. It works well for operators who like fixed, predictable repayments and who intend to keep the vehicle after the term rather than hand it back. Trades running work utes, family businesses adding a delivery van, and companies putting staff into SUVs all use hire purchase. If your accountant prefers the CHP treatment over a chattel mortgage, or if the structure simply matches how you like to run your assets, it can be an excellent fit. If you would rather own from day one, a chattel mortgage may suit better.

Eligibility and documents

You will generally need an active Australian ABN to access commercial hire purchase, since it is a business product. Lenders assess your trading history, credit position, and the type and age of the vehicle. Full-doc applications, supported by financials or tax returns and bank statements, tend to attract the sharpest pricing, particularly for strong, asset-backed businesses. Where paperwork is limited, low-doc options may use bank statements and BAS in place of full accounts, and newer businesses can still be considered subject to lender criteria. For many clean deals, your ABN, licence and vehicle details are enough to start. Enquiring through us is a soft credit check only, so your credit score is not affected by getting a quote.

Amounts, terms, rates and turnaround

Commercial hire purchase is available from around $20,000 up to $10 million+, so it covers a single vehicle or a growing fleet of utes and vans. Terms typically span 1 to 7 years, with a residual set to match your cash flow. Rates start from around 6.55% p.a. for strong, asset-backed deals; lower-doc profiles, older vehicles or weaker credit are priced higher, and all figures here are indicative and subject to lender assessment. Because the vehicle underpins the contract, pricing is usually more competitive than unsecured finance. For eligible applicants with tidy paperwork, same-day pre-approval and settlement inside 24 to 48 hours may be achievable.

Why comparing 80+ lenders matters

Not every lender still writes commercial hire purchase, and among those that do, appetite for residuals, vehicle age and private sales varies considerably. Approaching a single bank risks a decline or an average rate simply because their policy does not suit your deal. Overdrive submits one application to a panel of more than 80 banks and non-bank lenders, then brings you the CHP structures that actually fit. You work with one broker, we manage the negotiation, and your credit file is protected from repeated hard enquiries. The result is usually a sharper rate and a residual that genuinely matches your cash flow, without the legwork of chasing lenders yourself.

If commercial hire purchase looks like the right structure for your next business vehicle, we would be glad to prepare an obligation-free quote with an indicative rate and residual. A quote is a soft credit check only, so it will not touch your credit score, and there is no obligation to go ahead. Share your ABN and the vehicle you have in mind, and we will compare our lender panel to find the strongest fit. For eligible applicants, approvals can move fast, so you can take delivery and put the vehicle to work sooner.