Choosing between hire purchase and contract hire for a rigid truck fleet is one of the most consequential finance decisions a distribution operator makes. This guide sets out the key differences, with a worked example based on an 18-tonne Volvo FL curtainsider at £85,000.
Worked Example: 18t Volvo FL Curtainsider - £85,000
Vehicle: 2026 Volvo FL 18t curtainsider - list price £85,000
| Factor | Hire Purchase (HP) | Contract Hire (CH) |
|---|---|---|
| Deposit | £8,500 (10%) | 3 months upfront (c.£3,600) |
| Finance amount | £76,500 | N/A - rental basis |
| Term | 60 months | 60 months / 150,000 miles |
| Rate / rental | 6.5% APR | £1,195/month + VAT |
| Monthly payment | £1,494 | £1,195 |
| Total paid (excl. deposit) | £89,640 | £71,700 + initial |
| Ownership at end | Yes - vehicle yours | No - vehicle returned |
| Residual value risk | Operator bears it | Funder bears it |
| VAT position | On purchase price | On each monthly rental |
When HP Is the Better Choice
- You plan to run the vehicle beyond the initial finance term (5–8+ years total)
- You want to own the asset outright - useful for sole traders and SMEs building balance sheet
- You will refinance or part-exchange after 3–4 years to access equity
- You intend to exceed typical contract hire mileage thresholds (150,000+ miles over 5 years)
When Contract Hire Is the Better Choice
- You want predictable, lower monthly outgoings and to preserve working capital
- You replace vehicles on a regular cycle (every 3–5 years) and do not want residual value risk
- Maintenance contracts bundled into the monthly payment suit your fleet management model
- Your business is VAT-registered and benefits from 100% VAT reclaim on rentals
HP Advantages
- Ownership at end of term
- No mileage penalties
- Asset appears on balance sheet
- Can refinance or sell vehicle early
- Often cheaper over full asset life
Contract Hire Advantages
- Lower monthly payments
- No residual value risk
- Predictable costs - often maintenance included
- Off-balance-sheet treatment possible
- Easy fleet refresh at end of contract