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'Corporate Hire Purchase'

A 'Corporate Hire Purchase' or 'CHP' is a car finance arrangement usually taken out by individuals and large PTY LTD companies using the accrual method of accounting. Those using the cash method of accounting will not be able to claim the GST back upfront. Under a Corporate Hire Purchase arrangement, you do not own the vehicle in the same way that you would under a Chattel Mortgage.

A Corporate Hire Purchase is similar to a lease in that the finance company buys the vehicle with the intention of leasing it back to you. Under a Corporate Hire Purchase agreement there will be no debt shown on your balance sheet as you are only renting the vehicle. If you are using the cash method of accounting, you will be able to claim the GST component on each rental instalment of the Corporate Hire Purchase as they are paid.

For individuals, a Corporate Hire Purchase arrangement may still be taken out however it is not nearly as regulated as a 'Consumer Loan'. Often financiers will offer much more attractive interest rates for Corporate Hire Purchases and other business loans. An individual who is working as a PAYG employee might take a Corporate Hire Purchase if they intend to become self employed at some point, however you will only be able to claim the GST back on your Corporate Hire Purchase rental instalments once you begin your new business.

Advantages:
1. A company taking a Corporate Hire Purchase using the Accrual method of accounting may be able to claim the GST component upfront
2. Corporate hire purchases allow for a deposit, or vehicle to be used as a deposit
3. A Corporate Hire Purchase may consist of a residual component with no minimum residual requirement
4. Companies may be able to claim the entire payment as a business expenditure

Disadvantages:
1. A Corporate Hire Purchase may be more expensive to terminate early on in the loan due to the way the interest is calculated as opposed to a Consumer Loan
2. Depending on your situation, a lease may be cheaper due to the fact that the GST input credit is claimed by the financier, effectively reducing the amount you borrow

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Please note that the above information is factual only and does not take into account your personal financial situation. For any advice relating to financial matters always seek the advice of a professional who will take into consideration all factors relating to your situation.