One important advantage is that a hire purchase or leasing agreement is a medium term funding
facility, which cannot be withdrawn, provided the business makes the payments as they fall due.
The uncertainty that may be associated with alternative funding facilities such as overdrafts,
which are repayable on demand, is removed.
However, it should be borne in mind that both hire purchase and leasing agreements are long
term commitments. It may not be possible, or could prove costly, to terminate them early.
The regular nature of the hire purchase or lease payments (which are also usually of fixed
amounts as well) helps a business to forecast cash flow. The business is able to compare the
payments with the expected revenue and profits generated by the use of the asset.
Fixed Rate Finance
In most cases the payments are fixed throughout the hire purchase or lease agreement, so a
business will know at the beginning of the agreement what their repayments will be.