If you run a business and need a vehicle or equipment that earns its keep, a commercial hire purchase (CHP) is one of the most established ways to fund it. It lets your business use the asset and generate income from day one while you pay it off over an agreed term — then take full ownership at the end. Here’s how a CHP works, how it stacks up against a chattel mortgage and a lease, and when it’s the right fit.
What is a commercial hire purchase?
A commercial hire purchase is a finance arrangement where a lender buys the asset on your behalf and “hires” it to your business for a fixed term. You make regular repayments over that term, and once the final payment (and any residual) is made, ownership transfers to you. During the term the lender retains title, but your business has full use of the asset — it’s on your books, working for you. CHP is used for cars, utes, trucks, trailers and business equipment where the asset is used predominantly for business purposes.
How a CHP works, step by step
- You choose the vehicle or equipment (new or used, dealer or private sale).
- The lender purchases it and hires it to your business over an agreed term — typically 2–5 years.
- You pay fixed regular repayments, which can include a deposit and a balloon/residual to shape your cash flow.
- At the end of the term, once all payments are made, ownership passes to your business.
CHP vs chattel mortgage vs lease
The three main business finance structures look similar but differ on ownership, GST timing and tax treatment:
| Commercial hire purchase | Chattel mortgage | Finance lease | |
|---|---|---|---|
| Who owns it during the term | Lender (transfers to you at end) | You (lender holds security) | Lender |
| Ownership at end of term | Yours after final payment | Already yours | Optional payout / return |
| GST on purchase price | Claimable over the term / up front depending on accounting | Often claimable up front (cash basis) | GST applied to lease rentals |
| Typically suits | Businesses wanting eventual ownership with structured payments | Businesses wanting ownership from day one | Businesses that prefer off-balance-sheet use |
For a closer look at one of these side-by-side, see our guide on chattel mortgage vs car loan. The right structure depends on your accounting method, cash flow and whether ownership matters to you — your accountant is the best person to confirm the tax outcome.
Who a commercial hire purchase suits
A CHP tends to suit ABN holders, sole traders, self-employed operators and companies who use the asset mainly for business and want a clear path to ownership with predictable, fixed repayments. It’s popular for work utes, delivery vans, trucks and income-producing equipment. If your vehicle is mostly private use, a standard car loan or a business car finance option may fit better — we’ll help you compare.
Tax and GST — the short version
With a CHP, the interest charges and depreciation on the asset are generally tax-deductible to the extent it’s used for business, and the GST treatment depends on your accounting basis. Fixed repayments make budgeting straightforward. None of this is tax advice — confirm the specifics with your accountant for your situation.
Get a CHP sorted
We arrange commercial hire purchase finance across a panel of bank and non-bank lenders, so you’re matched to the structure and rate that suit your business rather than a single lender’s offer. Apply online or send a quick enquiry and our broker team will come back with your options.
Commercial hire purchase — FAQs
What is a commercial hire purchase in simple terms?
It’s a business finance arrangement where a lender buys an asset and hires it to your business over a fixed term. You make regular repayments, use the asset from day one, and own it outright once the final payment is made.
What’s the difference between a CHP and a chattel mortgage?
With a chattel mortgage you own the asset from the start and the lender holds security over it; with a CHP the lender owns it during the term and ownership transfers to you at the end. The GST and tax timing can differ, so your accounting method often decides which is better.
Can I claim tax on a commercial hire purchase?
Generally the interest and depreciation are deductible to the extent the asset is used for business. GST treatment depends on your accounting basis. Confirm the details with your accountant.
Do I need an ABN for a commercial hire purchase?
Yes — a CHP is a business finance product, so it’s intended for ABN holders using the asset predominantly for business. If you’re buying mainly for private use, a standard car loan is usually the better route.
Can I have a balloon payment on a CHP?
Yes. A balloon (residual) at the end of the term lowers your regular repayments, with a larger final amount payable to complete the purchase. It’s a common way to manage business cash flow.
Written and reviewed by the Finance Director at Alpha390 Finance.
This article is general information only and does not constitute credit, financial or tax advice. Alpha390 Finance operates under Australian Credit Licence 506065 (Five Tees Pty Ltd). Lending is subject to approval, lending criteria, terms, conditions and fees. Any figures are indicative examples for business lending and are subject to change.
