Car Lease Vs Hire Purchase. What Is The Difference?

When searching for the best financial option for your car purchase, getting a good deal is usually a priority but with so many financial providers and options found in the market, it can get quite challenging deciding which one is best for your circumstances. In this article, we will be discussing two of the common financial options that you can look into which are Car Finance Lease Vs Car Hire Purchase.

What is A Car Hire Lease?

A car hire lease is a contract outlining the terms and conditions under which one party agrees to rent an asset owned by another party. In short, leasing is like borrowing an asset with a contract. For this financial option, you don’t own the asset and you are often not responsible for things like maintenance and servicing. You can lease business equipment, a vehicle or even property

A car lease or finance lease is a financing option that enables business owners, employees and also the self-employed to use a car while having the benefits of ownership without actually owning it. Once you find the vehicle of your choice, it will be purchased on your behalf by a financier who is referred to as the Lessor and rented to you as the borrower referred to as the Lessee.

As the borrower, you will pay a fixed monthly lease rental for the term of the lease. If you don’t want to commit to an asset and you would like to eventually upgrade after your lease term is over, this financial option might be for you plus it’s inexpensive as well compared to other loans.

What is a Car Hire Purchase Loan?

A Hire Purchase is a flexible finance solution that allows you to hire a vehicle from a lender be it a new or used car for a set period of time. This means ownership of the car is under the lender for the duration of the Car Hire Purchase agreement and once you clear all the repayments the ownership transfers to you.

Note that even when the vehicle is under the lender’s ownership, you can still use the car as often as you wish. This financing option is mostly used by business owners as they don’t have to purchase a car immediately but instead they can easily make manageable monthly payments for the vehicle. In short, if you want to purchase an asset but you don’t have enough cash to pay upfront, the Car Hire Purchase financial option might be right for you. 

What are the similarities and differences?

Below we have done a comparison between car leasing and hire purchase so as to help you decide which one would be best for your circumstances. Some of the similarities include;

Loan Terms

When it comes to the loan terms, they range from 3-5 years but it is up to you and what works for you.

Type of Vehicle

The type of vehicle you choose is up to you and your budget.


It’s your responsibility as the buyer to ensure that the asset you  purchase is well maintained

Credit check

Both financial options are subject to a credit check from the lender or finance provider.

Some of the differences include;

Vehicle ownership

For Hire purchase, you get to own the vehicle after you complete the payments, whereas for leasing you have the option of either keeping the asset or upgrading it.

Monthly Payments

The monthly repayments for Hire Purchase are usually high compared to ordinary personal loans whereas for leasing the repayments are much more affordable. For leasing, payments are calculated based on the vehicle’s cost excluding GST, the term of the lease, interest charges, duties and other fees. For Hire Purchase, monthly loan payments are based on the total amount of the purchase price inclusive of GST, plus interest charges, duties and other fees.

End of term

At the end of the loan term for a Hire Purchase, the vehicle is yours to keep as long as you have cleared the repayments whereas for leasing, you can either keep the vehicle or upgrade to a new one after your lease term is over.

Kilometers during the term

No mileage cap is placed on a Hire Purchase deal though monthly payments are likely to be more as you pay off the car whereas for leasing you will be asked to decide how many miles you want to drive each year typical range being 8,000-30,000 miles which you will need to stick to avoiding excess mileage charges.

Read more: What Is A Balloon Payment And Is It The Right Finance Option For You

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