The Main Finance Structures for CNC Machines
| Feature | Hire Purchase | Finance Lease | Operating Lease | Business Loan |
|---|---|---|---|---|
| You own the asset? | Yes (at end) | Option to extend | No | Yes (from day 1) |
| On balance sheet? | Yes | Often yes | Often no | Yes |
| VAT treatment | Upfront on asset | Monthly on rental | Monthly on rental | Upfront on asset |
| Typical deposit | 0–20% | 0–10% | 0–3 months advance | Varies |
| Monthly cost (relative) | Medium | Low–Medium | Lowest | Medium–High |
| Flexibility to exit | Limited | Some break clauses | Better break options | Varies |
| Best for | Ownership, capital assets | Cash flow, accounting | Regular upgrades | Simple funding |
Worked Example - £200,000 CNC Machine, 5-Year Term
| Structure | Deposit | Monthly Payment (est.) | APR | Own Asset at End? |
|---|---|---|---|---|
| Hire Purchase | £20,000 (10%) | £3,580/mo | 7.5% | Yes |
| Finance Lease | Nil | £3,420/mo | 7.2% | No (peppercorn option) |
| Operating Lease | 3 months advance | £2,950/mo | n/a (rental) | No |
| Business Loan | Nil | £3,780/mo | 8.5% | Yes (from day 1) |
Figures are indicative and based on illustrative rates. Not a guaranteed quote. Rates sourced from the DBF lender panel.
Which Structure Is Right for You?
Hire Purchase
Choose HP if you want to own the machine at the end of the term, are comfortable with asset ownership on your balance sheet, and want a straightforward, fixed-cost structure.
Finance Lease
Choose finance lease if you want a slightly lower monthly payment, prefer to keep the asset off the balance sheet, or your accountant recommends it for your specific tax position.
Operating Lease
Choose operating lease if you plan to upgrade the machine at the end of the term, want the lowest monthly payment, and do not need to own the asset.
Business Loan
Consider a business loan if you want immediate ownership, have no preference for asset finance structures, or if the loan rate is competitive against HP for your specific situation.