Fleet and equipment
Plant hire finance options for new hire companies
Hire purchase, finance lease, operating lease and refinance explained for people building a first hire fleet, including what lenders want to see when you have little or no trading history.
Key takeaways
- Hire purchase suits machines you'll keep and want to own. VAT is usually paid upfront.
- Leases spread VAT across rentals and suit kit you'll replace regularly.
- Refinance releases cash from machines you already own outright.
- New businesses can often get finance, usually with a bigger deposit, a director's guarantee or both.
- Match the term to the machine's earning life, not just the lowest monthly payment.
Why most hire firms finance their fleet
A hire machine earns money week by week. Paying for it the same way keeps cash free for wages, fuel, insurance and repairs, the things that actually stop a young hire business. Buying outright only makes sense when you have cash to spare after a healthy working-capital reserve.
The four main types of plant finance
Hire purchase (HP)
You pay a deposit and fixed monthly instalments, and own the machine after the final payment. You can usually claim capital allowances from the start. VAT on the full price is normally due upfront.
Finance lease
The lender owns the machine and you rent it for most of its useful life. VAT is added to each rental. At the end you typically continue on a low secondary rental or sell the machine and share the proceeds.
Operating lease
A shorter rental where the lender takes the residual value risk. Good for fast-replacement fleets and for keeping debt off the balance sheet; you hand the machine back or upgrade at the end.
Asset refinance
Borrow against machines you already own outright. Useful for contractors turning existing kit into a hire fleet, or for funding the next machine.
Side by side
| Hire purchase | Finance lease | Operating lease | Refinance | |
|---|---|---|---|---|
| Best for | Machines you'll keep and own | Kit you'll replace regularly | Short fleet cycles | Releasing cash from owned kit |
| Who owns it | You, after final payment | The lender | The lender | You, as security |
| At the end | It's yours | Keep renting or sell | Hand back or upgrade | Loan repaid |
| VAT | Usually upfront | On each rental | On each rental | Depends on structure |
| Typical term | 2–5 years | 2–5 years | 1–4 years | 1–5 years |
General patterns. Terms, rates and tax treatment depend on the lender and your business.
Finance for new plant hire businesses
A short trading history doesn't rule you out, but it changes the deal. Specialist lenders that understand plant will often fund start-ups, typically asking for one or more of:
- A larger deposit, often 10–25%.
- A personal guarantee from directors.
- Evidence of your experience in plant, construction or hire.
- A simple business plan and cash-flow forecast.
- Newer machines, or shorter terms on older ones.
What lenders look at
| Factor | Why it matters |
|---|---|
| Trading history | Longer history means more data on how you repay. |
| Credit profile | Business and personal credit for directors of young companies. |
| Machine age and type | Popular, newer machines have stronger resale values as security. |
| Deposit | Reduces the lender's risk and your monthly cost. |
| Affordability | Whether hire income comfortably covers repayments. |
| Supplier | Dealer, auction or private seller affects checks and paperwork. |
VAT and tax
On hire purchase you normally pay VAT on the whole machine at the start and reclaim it on your next VAT return if you're registered. That's a real cash-flow hit for a start-up. Leases add VAT to each rental instead. Capital allowances and the treatment of interest also differ between types, so check with your accountant before choosing.
Common mistakes
- Choosing the longest term to get the lowest payment on a machine you'll sell in three years.
- Forgetting upfront VAT on HP in the cash-flow forecast.
- Financing a machine before you've proved demand for it.
- Not checking early settlement terms if you plan to upgrade.
- Using personal credit cards or overdrafts for long-life assets.
FAQs
Common questions
Can a new business get plant hire finance?
Is hire purchase or leasing better for plant hire?
How much deposit do I need for plant finance?
Can I finance used and auction machines?
Keep going
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How to price plant hire
Set rates that cover finance, wear, transport and downtime.
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How to start a plant hire business in the UK
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This guide is general information for people setting up a plant hire business in the UK. It is not legal, tax, insurance or financial advice. Rules and thresholds change, so check current guidance on GOV.UK and take advice from an accountant, solicitor or broker before acting.