Companies willing to invest can now draw on a wide range of financing solutions. Each has its own specific advantages, which often depend on the situation of the company and the specific investment project. Hire purchase is particularly suitable if, unlike with leasing, you want to keep the investment object at the end of the contract period at all costs. With hire-purchase agreements, the ownership under civil law is automatically transferred to you with the final instalment to the hire-purchaser.
From an economic point of view, however, with hire purchase you are already the owner of the property for the entire period of use and keep it in the fixed assets and thus in your balance sheet. In return, you can not only depreciate the object for tax purposes, but also claim the financing interest as operating expenses.
The temporal aspect of this type of financing is also interesting: In contrast to leasing contracts, whose terms must be significantly shorter than the specifications in the depreciation tables, the term of a hire-purchase contract can cover up to 100 percent of the normal useful life. The treatment of VAT is also different compared to leasing: it is due in full at the start of the contract and is therefore deductible - including all instalments, possible down payments and the final instalment.