The difference between Leasing/Hire Purchase​

What is the difference between leasing and hire purchase? An option that adds liquidity to your business; easy to apply for, fast approvals and optional patterns to suit your particular needs

Initial contract

Minimum term of 3 years

for long-term equipment use

Minimum term of 1 year

to fully-paid ownership

Ownership upon Contract Termination

Options

You can elect equipment ownership, release extension or return of equipment to us

Immediate ownership

Irrevocable ownership upon contract fulfillment

Suitable types of Equipment

Computers and IT devices

Operating lease contracts are suitable for equipment or devices that need frequent replacement due to rapid technological advances.

Long-life equipment

If the required equipment has a long useful life and your business is not faced with frequent change, hire purchase contracts with ownership at the fulfillment of the contract are most suitable.

Tax deductions

Larger Tax Deductions

Monthly rental payments per the leasing contract are 100% tax deductible These tax deductions are greater than the annual depreciation plus interest on the asset.

Lesser Tax Deductions

Regardless of ownership, the equipment under contract is considered an asset belonging to the respective business from the start. Therefore, the costs used in tax calculation do not include leasing, but are identified as depreciation, plus interest payable, which both allow lesser tax deductions.

Suitable businesses

Already Profitable / New Businesses

  • Businesses that have reached the break-even point and are then profitable, and need additional equipment
  • Newly established businesses requiring land, buildings and equipment. Because long-term loans have been used to finance their land and building investments, they may need to resort to equipment leasing so that they can use their remaining cash as working capital
  • Businesses using equipment or devices that are subject to frequent modifications and upgrades, such as computers, or a large volume of other office equipment and supplies.

SMEs and Micro Businesses

  • Small enterprises that want to own equipment and have few liabilities or tax burdens
  • Businesses using equipment with long useful lives and are not generally subject to frequent replacement.
Comparison of LEASING and HIRE PURCHASE
Service typeLEASINGHIRE PURCHASE
ObjectiveFor long-term useFor acquisition of ownership
Ownership at contract terminationAccording to contract type (ownership, lease extension or return of equipment)Immediate ownership
Contractual term3-5 years1-5 years
Limit70-100% of the asset valueAt KF&E’s discretion
Rental RateFixed throughout the contract termFixed throughout the contract term
InstallmentsEqual monthly installmentsEqual monthly installments
CollateralPersonal guarantee and lien on the equipment registered as collateralAt KF&E’s discretion
Equipment locationThe equipment may be located on land mortgaged with either KBank or other financial institutionThe equipment may be located on land mortgaged with either KBank or other financial institution
Booking on balance sheetAs rentAs depreciation plus interest payable
Tax deductionLarger tax deductionsLesser tax deductions
Leasing Hire Purchase