Worked example: leasing vs buying a £12,000 machine outright
This is an illustrative worked example with round numbers, not a quote — real asset finance pricing depends on the asset, the term, and the business applying. The question it works through is the one every cafe, workshop and kitchen faces eventually: pay cash for a big piece of equipment, or finance it and keep the cash?
The setup: a cafe needs a £12,000 commercial espresso machine. It holds £15,000 in the bank. The illustration compares buying outright against a three-year hire purchase agreement totalling £13,800 (a £1,800 finance cost, or 15% of the price over three years — a round number chosen for arithmetic, not a market rate).
What each route does to the bank balance
Buying outright turns £15,000 of cash into £3,000 of cash and a machine. Hire purchase keeps £14,617 in the bank after the first monthly payment and commits the business to £383 a month for 36 months. Same machine either way; completely different cash position through the life of the agreement.
| Buy outright | Hire purchase (36 months) | |
|---|---|---|
| Cash out on day one | £12,000 | about £383 (first payment) |
| Cash left from £15,000 | £3,000 | about £14,617 |
| Monthly commitment | None | about £383 |
| Total paid for the machine | £12,000 | £13,800 |
| Cost of keeping the cash | — | £1,800 over three years |
What the £1,800 is actually buying
The finance cost buys a cash buffer of roughly £11,600 through year one. Whether that is worth £1,800 depends entirely on what the buffer prevents or enables: a cafe that would be left unable to absorb a broken fridge, a quiet month, or a stock opportunity with £3,000 in the bank is paying £50 a month for resilience. A business already holding comfortable reserves is paying £50 a month for nothing it needed.
The tax treatment differs between routes too — capital allowances on a purchase versus how hire purchase and lease payments are treated — and it genuinely changes the comparison for some businesses. That part is a conversation for your accountant, not a generic table; the point here is only that the sticker comparison above is not the whole picture.
The questions this example should raise about any real offer
- What is the total payable over the full term, with every fee and any balloon payment included?
- Who owns the machine during and after the agreement — and what happens at the end of a lease versus hire purchase?
- What happens if the business wants to settle early, or the machine fails mid-term?
- Is a personal guarantee required alongside the asset security?
- How does the tax treatment of each route apply to this business? (One for the accountant.)
Frequently asked questions
Is it better to lease or buy business equipment outright?
Neither is better in general. Buying outright costs less in total but concentrates cash into one asset; finance costs more in total but preserves the cash buffer. The comparison that matters is what the preserved cash is worth to your specific business against the quoted finance cost — plus the tax treatment of each route, which your accountant can apply to your position.
What is the difference between hire purchase and leasing?
With hire purchase the business is buying the asset in instalments and owns it at the end. With a lease the business rents the asset for the term, and what happens at the end depends on the lease type. Ownership, end-of-term position and tax treatment all differ, so confirm which structure any quote actually is.
Are these figures what asset finance actually costs?
No — the numbers are round figures chosen to make the mechanics easy to follow, not market rates. Real pricing depends on the asset, term, deposit and the business’s trading profile. A real quote should state the total payable over the term as one number, including fees and any balloon payment.
Is CapExpand FCA regulated?
No. CapExpand Ltd is not authorised by the Financial Conduct Authority and only completes non-regulated introductions, which is why we currently work with limited companies and LLPs for business purposes rather than sole traders or partnerships.
Pricing a real machine?
Tell us the asset and the amount. The quote comes back with the total payable as one number.
Important information
CapExpand Ltd is not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. We work with UK limited companies and LLPs only, for business and commercial purposes. We are not a lender and we do not provide financial, tax or legal advice. We work with a panel of lenders whose particulars are available on request, and we receive commission from the lender if a deal completes, at no cost to you. All lending is subject to status, valuation where applicable and the lender's own checks.
Registered office: Pure Offices, Lake View Drive, Annesley, Nottingham, NG15 0DT. Company No. 14433858.