Container hire purchase: buying in instalments and rent-to-own
With hire purchase you pay for the container in instalments and become the owner with the last one. But the same name is often used for something else: a rental that is later partly credited towards the purchase price.
Two things with the same name
In the container trade, “hire purchase” (Mietkauf) covers two different models. The difference matters because it decides ownership, tax and cost.
| True hire purchase | Rental with purchase option | |
|---|---|---|
| Intention at signing | you want to buy | you rent, perhaps buy later |
| Ownership | passes to you automatically with the last instalment | only if you exercise the option |
| Term | fixed | rental usually cancellable |
| Payments | price plus interest in instalments | rent; part is credited if you buy |
| Tax | like a purchase | like a rental, until you buy |
| Depreciation | yours, from delivery | the owner’s |
True hire purchase
True hire purchase is essentially buying in instalments. The seller retains title until the last instalment, but economically the container is yours from the start.
Two tax points follow that often surprise people (German rules):
- VAT becomes due in full at the start. Because hire purchase counts as a supply of goods, the seller invoices VAT on the full price at delivery. Businesses entitled to deduct input tax recover it with the next VAT return, but have to pre-finance it briefly.
- You depreciate the container yourself. Depreciation starts on delivery; the interest portion of the instalments is a business expense.
At the end of the term the container is yours without further payment – including its residual value. That is exactly what usually makes hire purchase cheaper over the full term than leasing without takeover.
Rental with purchase option
Many dealers offer to rent a container first and buy it later, with part of the rent paid being credited towards the purchase price. That is practical if you do not yet know how long you will need it.
Check four points carefully:
- Credit rate: is the full rent credited or only part? 50% is very different from 100%.
- Deadline: by when must the option be exercised, and does the credit lapse afterwards?
- Purchase price: is the later price fixed today, or does it follow the price at that time?
- Condition: you buy the container as it is after the rental period – with all signs of use.
Worked example
A new 20 ft office container costs €10,000 net. True hire purchase over 36 months at an assumed 6 to 8% interest:
| Item | Amount (approx.) |
|---|---|
| Monthly instalment, net | €304–313 |
| Sum of instalments | €10,950–11,280 |
| Interest cost compared with cash purchase | €950–1,280 |
| VAT on delivery (19%) | €1,900, recoverable as input tax |
| Value of the container after 36 months | approx. €6,500 (assumption), yours |
The interest cost is the price of not having to find €10,000 at once. Whether it is worth it depends on what the capital would earn elsewhere.
Hire purchase or leasing?
| Hire purchase | Leasing | |
|---|---|---|
| Ownership at the end | certain | only with takeover |
| VAT | in full at the start | with each instalment |
| Depreciation | yours | the lessor’s |
| Instalments as business expense | interest portion only, plus depreciation | in full |
| Residual value risk | yours, but so is the upside | depends on contract |
| Also for private individuals | sometimes | hardly |
Rule of thumb: if you definitely want to keep the container, hire purchase is usually the better choice. If you want to swap it after a few years and expense the instalments in full, leasing fits better.
What to check in the contract
- Total price, interest rate and all fees in writing
- Retention of title and the moment ownership passes
- What happens on late payment or if you want to settle early?
- Insurance obligation during the term
- Warranty – it applies as with a normal purchase, see Purchase contract and warranty
- For rental with purchase option: credit rate, deadline, purchase price and condition
Important note
All figures are orientation values without guarantee based on the stated assumptions. Whether a contract is treated for tax as a supply or as a rental depends on how it is drafted; this article does not replace tax or legal advice.