# Hire purchase — what it means for tradies and trade businesses > Hire purchase is often the bridge for newer trade businesses not yet ready for a chattel mortgage. Here's how it works, when it suits, and the trade-offs. Source: https://tradiefinance.co.nz/glossary/hire-purchase Published: 2026-04-01T08:00:00.000Z Category: asset-finance Tags: glossary, hire-purchase, asset-finance, sole-trader Image: https://tradiefinance.co.nz/images/resources/generated/tradie/glossary/hire-purchase-primary.jpg Image alt: Work vehicles on a New Zealand build site for Hire purchase — what it means for tradies and trade businesses --- ## What hire purchase is With a **hire purchase** (HP), the lender keeps legal ownership of the asset — your van, ute, tools or machinery — while you pay it off in regular instalments. You get full use of it from day one, and on the final payment, ownership transfers to you. Day-to-day it feels exactly like owning the gear. The ownership difference mostly matters for three things: how it's treated for tax, what happens if you want to exit early, and where you stand if payments fall behind. TradieFinance is a broker, not a lender. We place your hire purchase with the lender that fits your situation and price it as sharply as we can — but the lender is the one holding title until you've made that last payment. ## When hire purchase is the right call for tradies Hire purchase often makes sense over a [chattel mortgage](/glossary/chattel-mortgage) when: - You're newly self-employed — under 12 months trading. - You don't yet have a full financial year of accounts behind you. - The vehicle is part personal-use and you're not GST-registered. - You're moonlighting from a PAYE job and the trade work is a side income for now. We see this every week: a sparky or chippie going out on their own who needs a work ute before the books look the part. Because HP is assessed more like personal finance — payslips, bank statements, existing commitments — approval is usually faster and doesn't hinge on a full set of business financials. That makes it a genuine option when a [low-doc loan](/glossary/low-doc-loan) or a standard business facility isn't on the table yet. HP and chattel mortgage can look almost identical on the repayment schedule but behave very differently at tax time. The right one depends on how long you've been trading, whether you're GST-registered, and how the asset is used. We'll talk it through before you sign anything. ## Hire purchase vs chattel mortgage at a glance | | Hire purchase | Chattel mortgage | | --- | --- | --- | | Who owns the asset | Lender, until final payment | You own it from day one | | Typical fit | Newer or part-time trade businesses | Established, GST-registered businesses | | What's assessed | More like personal finance | Business trading and financials | | On your balance sheet | Once title transfers | From the start | This is a simplified view, not advice for your specific setup — but it's the shape of the conversation we have with tradies most days. ## The trade-offs - **Tax**: GST is generally claimed across the payments rather than all upfront, and depreciation is handled separately from the loan repayments — it's a deduction on the asset itself, not part of your finance. For an established, GST-registered business, a chattel mortgage is often more efficient. The exact treatment depends on your circumstances, so confirm with your accountant or IRD before you assume anything. - **Balance sheet**: The asset typically doesn't sit on your business balance sheet until title transfers on that final payment. - **Early exit**: Paying out early is usually possible, but the terms differ from a chattel mortgage. Ask us what your specific agreement allows before you commit. For most established trade businesses, a chattel mortgage tends to win on tax and balance-sheet treatment. Hire purchase is the bridge that gets you into the right gear now, until you qualify for the structure that suits you better down the track. ## Talk to a real broker Picking between hire purchase and a chattel mortgage isn't something to guess at — the wrong call can cost you at tax time. We do this every day, and a quick chat usually sorts it. [Book a call](/book-a-call) and we'll look at your situation and line up the structure that actually fits. No pressure, no jargon. If you'd rather just ask a question first, head to our [help centre](/help). ## See also - [Chattel mortgage](/glossary/chattel-mortgage) - [Financing your first work van](/blog/financing-your-first-work-van) - [Low-doc finance for self-employed tradies](/blog/low-doc-finance-for-self-employed-tradies)