Choosing between hire purchase (HP) and finance lease for a rough terrain forklift or material handler is a common decision for construction companies. The answer isn't the same for everyone - it depends on your tax position, balance sheet preferences, how long you want the machine and whether eventual ownership matters to you.
This guide sets out the key differences plainly, runs through a worked example on a Manitou MHT 10130 heavy duty teletruk at £85,000, and gives you a simple decision guide to identify which product suits your situation.
HP vs Finance Lease - Core Differences
| Feature | Hire Purchase (HP) | Finance Lease |
|---|---|---|
| Ownership at end of term | Yes (after nominal final payment) | No - you never own the asset |
| Monthly payment | Typically slightly higher | Can be lower (residual not fully amortised) |
| Balance sheet treatment | Asset and liability appear on balance sheet | Off-balance-sheet (pre-IFRS 16 for some) |
| Capital allowances | Yes - you claim as asset owner | No - lender claims; you deduct rentals |
| Tax deduction method | Capital allowances (AIA eligible) | Full rental deductible as operating expense |
| VAT treatment | VAT on each payment (reclaimable) | VAT on each rental payment (reclaimable) |
| End-of-term options | Own the asset outright | Extend, return or participate in sale |
| Flexibility if you want to exit early | Settlement figure applies | More complex early termination |
| Suitable for AIA claim | Yes | No |
| Best for equipment you'll use long-term | Yes | Less so |
Worked Example: Manitou MHT 10130 Heavy Duty Teletruk at £85,000
The Manitou MHT 10130 is a heavy-duty teletruk (rough terrain forklift variant) with 10-tonne capacity and 13-metre reach, widely used on major housebuilding sites and commercial construction projects for heavy material placement. At £85,000 for a new unit, the finance structure decision has meaningful financial consequences.
Assumptions for this example: £85,000 purchase price, 10% deposit (£8,500), 48-month term, 6% APR for HP / 6.5% for finance lease, estimated residual value at 48 months: £28,000 (33% of original value).
Worked Example: HP vs Finance Lease on Manitou MHT 10130 (£85,000)
Hire Purchase (HP)
- Asset price: £85,000
- Deposit (10%): £8,500
- Amount financed: £76,500
- Rate (APR): 6%
- Term: 48 months
- Monthly payment: c.£1,795
- Total payments: c.£86,160
- Finance cost: c.£9,660
- Ownership at end: Yes
- Asset value at 48 months: c.£28,000
- Net cost (finance less asset): c.£-18,340
Finance Lease
- Asset price: £85,000
- Deposit / advance rental: £8,500
- Amount leased: £76,500
- Rate (APR equiv.): 6.5%
- Residual assumed: £18,000
- Monthly rental: c.£1,580
- Total rentals paid: c.£75,840
- Finance cost: c.£8,090
- Ownership at end: No
- Net cost (all rentals): c.£84,340
Figures are illustrative. Actual monthly payments will depend on lender, structure and rate at the time of application. VAT excluded. Consult your accountant on tax treatment.
What This Example Shows
On the HP deal, you pay slightly more per month (£1,795 vs £1,580) but at the end of 48 months you own a Manitou MHT 10130 worth approximately £28,000. That machine is a working asset you can continue to use, sell or use as security.
On the finance lease, lower monthly rentals mean better short-term cash flow. You deduct all rentals as operating expenses (potentially more tax-efficient if you can't use AIA). But at the end of 4 years you have no asset - you return the machine or pay for an extension.
For most construction businesses operating rough terrain forklifts intensively on their own sites, HP is the better long-term outcome. Rough terrain forklifts hold their value reasonably well when properly maintained, and ownership gives you an asset that can be refinanced, sold or retained as a working machine for its remaining service life.
Decision Guide - HP or Finance Lease?
Choose HP when:
- You want to own the machine at the end of the term
- The machine will be used intensively across your own sites
- You want to claim Annual Investment Allowance (AIA)
- The equipment has good residual value (Manitou, JCB, Merlo)
- You want the asset on your balance sheet (banking covenants permitting)
- You're buying used equipment (finance lease less practical for used)
- Long-term cost of ownership is more important than monthly cash flow
Consider Finance Lease when:
- Cash flow and monthly payment level are the priority
- You want off-balance-sheet treatment (pre-IFRS 16 applicable)
- You don't need long-term ownership - technology or model changes likely
- Full rental deductibility suits your tax position better than capital allowances
- You're a large company and IFRS 16 treatment is less of a concern
- The lender offers a structured balloon or residual value that lowers your payments
Rough Terrain Forklift Residual Values - Why Ownership Often Makes Sense
Unlike some plant categories where equipment becomes rapidly obsolete, well-maintained rough terrain forklifts from established brands retain meaningful value. A Manitou MT 1840 or MHT series machine that cost £55,000 new typically retains 35–50% of its value after 5 years of normal site use. This means:
- HP leaves you owning an asset worth £19,000–£27,000 at the end of a 5-year term
- That residual value can be leveraged for refinancing a new machine, or the machine simply keeps working beyond the finance term at zero monthly cost
- Finance lease on the same machine means forgoing that £19,000–£27,000 residual in exchange for lower monthly payments - a trade-off that rarely favours the lessee on long-lived, value-retaining plant
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