The Two Main Options
When financing a farm building, grain store, slurry store or other permanent on-farm infrastructure, you will generally be offered two structures: Hire Purchase (HP) and Finance Lease. Both spread the cost over a fixed term, but they differ in ownership, tax treatment and residual value.
Hire Purchase vs Finance Lease: Side-by-Side
| Feature | Hire Purchase | Finance Lease |
|---|---|---|
| Ownership at end of term | Yes - you own the asset | No - lender retains ownership |
| Deposit required | Typically 10–20% | Often 0–10% |
| Monthly payments | Usually slightly higher | Usually slightly lower |
| Capital allowances | Yes - AIA available | No - lease payments deductible instead |
| Balance sheet impact | Asset & liability on balance sheet | Varies (IFRS 16) |
| Flexibility to upgrade | Less flexible | More flexible - can hand back or refinance |
| Best for permanent buildings | Yes | Yes - but check residual value |
When to Choose Hire Purchase
HP is typically the better choice for permanent farm buildings and infrastructure where you intend to own the asset long-term (grain stores, livestock buildings, milking parlours). You benefit from capital allowances and ownership passes to you at the end of the term for a nominal option-to-purchase fee.
When to Choose Finance Lease
Finance lease can be more attractive where you want lower monthly outgoings, where the asset may be upgraded in future, or where your accountant advises that rental payments are more tax-efficient for your business than capital allowances. Finance lease is also often available with a zero or low deposit.
Which Structure Do Lenders Prefer for Farm Infrastructure?
Most specialist agricultural lenders offer both structures for permanent farm buildings. The best choice depends on your tax position, cash flow needs and long-term plans. Doulton Bridging Finance will present both options with indicative costs so you can make an informed decision.