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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Hire purchase (HP)

What is hire purchase, and how does it differ from a lease or a loan?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Hire purchase is asset finance in which the financier buys the asset and hires it to the business for a series of instalments, with ownership passing to the business only when the final payment, often with a small option fee, is made. Until then the financier owns the asset and can repossess it on default, which usually makes HP easier to obtain than unsecured borrowing for vehicles and plant. It is common in the UK and New Zealand, while in Australia a chattel mortgage is now the more usual form for business vehicles. In Australia and New Zealand the financier registers its interest on the PPSR.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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