Asset finance in the UK: hire purchase, leasing and what they cost

For equipment you will keep, hire purchase is the default choice: you own the asset after the last payment, and HMRC lets you claim the purchase against the £1 million Annual Investment Allowance from the day you start using it. Leasing suits kit you want to hand back, but you cannot claim capital allowances on it. On Funding Circle's published example, £50,000 of equipment over 60 months costs £10,756 in interest and fees.

Published 29 October 2025Last updated 1 November 2026

Lender terms and tax rules checked 1 November 2026.

Hire purchase vs leasing

	Hire purchase	Lease
At the end	You own the asset after the final payment	You return it, extend, or upgrade
Capital allowances	Yes: items bought on hire purchase qualify once you start using them, but not the interest	No, unless it is a long funding lease
Monthly payment	Higher: you pay off the full price	Often lower: you pay for the use, not the whole value
Best for	Machinery, vans and kit you will run for years	Technology you will replace, or kit you need for a set period

Asset refinance is a third route: you borrow against equipment you already own outright. Funding Circle's panel offers it alongside hire purchase, finance lease.

What asset finance costs, worked through

Funding Circle's asset finance calculator shows this scenario:

Asset cost financed	£50,000
Interest	£10,461
Administration fee	£295
Total payable	£60,756
Monthly payment	£1,013

The page does not state the term, but £60,756 ÷ £1,013 = 60.0, so it is a 60-month agreement. £10,461 of interest on £50,000 over 60 months is about 7.7% a year. Funding Circle calls the figures indicative and publishes no rate (Rates: Not published).

Now the tax. If a limited company buys that £50,000 of qualifying equipment on hire purchase, it can claim the full cost against the Annual Investment Allowance in the year it starts using it. The saving depends on its profit:

Profits over £250,000, taxed at 25%: £50,000 × 25% = £12,500 less Corporation Tax.
Profits of £50,000 or less, taxed at 19%: £50,000 × 19% = £9,500, and only if the year's profit is big enough to absorb the claim.
In between, Marginal Relief applies to profits between £50,000 and £250,000, so the saving falls between the two.

The interest is not part of the capital allowance claim. Set against the £10,756 finance cost, the year-one saving is £9,500 to £12,500. With a lease you claim no capital allowances; the rentals go through your accounts as a running cost, so relief comes month by month instead of in year one, and you own nothing at the end. Sole traders and partnerships can claim AIA too. Your accountant will confirm the figure for your year.

UK asset finance providers, on published terms

Provider	Products	Amounts and terms	Who can apply
Funding Circle	Hire purchase, finance lease, asset refinance and Growth Guarantee Scheme asset finance; arranged through a panel of partner lenders, not lent by Funding Circle itself	£10,000 to £5,000,000, 1 to 7 years; rates not published	UK limited companies and LLPs trading for at least a year with turnover of at least £50,000 a year; sole traders and small partnerships cannot apply
Novuna Business Finance	Hire purchase and leasing; does not currently offer business loans	Amounts: Not published. Rates: Not published.	UK limited companies, PLCs, LLPs and partnerships of four or more partners, trading at least three years
Capify	Lists asset finance among its products	Asset finance terms: Not published	Trading 12 months+, turnover £10,000 a month (£120,000 a year)

Novuna Business Finance

Novuna is a trading style of Mitsubishi HC Capital UK PLC, FCA register number 704348. Its business finance arm says it has funded over £5bn to UK companies across more than 50 industries, and it deals through direct enquiries, plus manufacturers, dealers and brokers. It is for established firms only: you need to be one of UK limited companies, PLCs, LLPs and partnerships of four or more partners and to have traded for three years. Novuna does not publish amounts, rates or deposits, so you get a price only by enquiring. Its separate Novuna Business Cash Flow site advertises rates from 0.5%, without saying whether that is a monthly or annual figure: treat that as a headline, not a rate you can compare.

Before you sign

Ask for the total payable, including any documentation, administration or option-to-purchase fee, and divide by the number of months.
Check the deposit. Neither Funding Circle nor Novuna publishes one; a larger deposit cuts the interest but uses the cash you were trying to keep.
Check the end of a lease. Know whether you can buy, extend or must return the asset, and in what condition.
Ask about the Growth Guarantee Scheme. Accredited lenders can offer asset finance from £1,000 with a government guarantee to the lender; you stay 100% liable. See government-backed business loans.

If the purchase is not a physical asset (stock, wages, a tax bill), asset finance does not fit: compare business loans, bank business loans or, if customers owe you money, invoice finance. For what lenders charge on a plain loan, see business loan interest rates. If the kit is a card terminal, compare providers before financing it: a free statement review shows what your current machine really costs.

Compare hire purchase and lease quotes for your equipment

One enquiry reaches our partner's panel of more than 200 UK lenders. A specialist calls you back, Mon to Fri, 9am to 5:30pm.

Funding enquiries are handled by our specialist commercial finance partner. We may receive a commission; it never changes the rate you are offered. Finance is subject to status.

Questions people ask

What is asset finance?

Asset finance spreads the cost of equipment, machinery or vehicles over monthly payments, with the asset itself as the lender's security. The two main forms are hire purchase, where you own the asset after the last payment, and leasing, where you rent it and hand it back or extend.

Who owns Novuna Business Finance?

Novuna is a trading style of Mitsubishi HC Capital UK PLC, authorised and regulated by the FCA (register number 704348). Novuna Business Finance offers hire purchase and leasing to UK limited companies, PLCs, LLPs and partnerships of four or more partners that have traded for at least three years.

Does Novuna Business Finance offer business loans?

Not from its asset finance arm: Novuna Business Finance does not currently offer business loans. Its separate Novuna Business Cash Flow site covers loans and equipment finance, and advertises rates from 0.5%, without saying whether that is a monthly or annual figure. Ask for the annual rate and total payable before comparing it.

Can I claim capital allowances on leased equipment?

Generally no. HMRC says you cannot claim on things you lease unless it is hire purchase or a long funding lease, because you must own them. Equipment bought on hire purchase does qualify: items bought on hire purchase qualify once you start using them, but not the interest.

Do cars qualify for the Annual Investment Allowance?

No: business cars do not qualify for AIA. Cars have their own capital allowance rules on GOV.UK. Vans, machinery and most equipment are plant and machinery and can qualify.

Can a new business get asset finance?

It is harder. Funding Circle's asset finance panel wants UK limited companies and LLPs trading for at least a year with turnover of at least £50,000 a year; sole traders and small partnerships cannot apply; Novuna Business Finance wants at least three years of trading. Growth Guarantee Scheme asset finance starts at £1,000, but lenders still set their own trading rules. A young business may do better with a Start Up Loan used to buy the kit outright.

Is hire purchase or leasing cheaper?

Compare the total payable, then the tax. A lease can have lower monthly payments because you do not pay off the whole value, but you own nothing at the end and cannot claim capital allowances. For kit you will keep for most of its working life, hire purchase usually costs less overall: you end up owning something with resale value, and the £1 million Annual Investment Allowance gives the tax relief in year one.

Sources

Every figure on this page comes from the lender's or scheme's own published page, read on 1 November 2026. Panel rate ranges come from our partner's lender-panel catalogue, checked 1 September 2026. We do not use comparison sites as sources.