Hire Purchase
Hire Purchase (HP) is a financing arrangement whereby the bank finances your purchase of equipment and commercial vehicles used for business operations. Unlike a term loan in which the borrower holds legal title to the goods from the onset, the bank retains legal title to the asset financed under Hire Purchase until the final instalment is fully repaid. With competitive rates and flexible repayment terms, you can look forward towards enhanced business capability and productivity without worrying about straining your cashflow.
At DBS Enterprise Banking, we offer hire purchase financing for a wide range of equipment and machinery as well as commercial vehicles. For more product information about our financing terms for HP and qualifying list of equipment and commercial vehicles, please refer to our Hire Purchase FAQ.
Customer Eligibility
Hire Purchase is extended to all locally registered business entities. Business entities comprise sole proprietors, partnerships and private limited companies.
Application Procedure
Application is easy and fast subject to a minimum loan size of $50,000. To facilitate our loan evaluation, please submit the following document to us and you will know the outcome of your application soon: -
For corporate application
- Company business profile
- Financial statements for the past 3 years
- Bank statements for the past 3 months [for non-DBS applicants]
- Commercial sales invoice/sales quotation (to be addressed to DBS Bank Ltd]
Fees, Rates and Charges
Hire Purchase is offered on a flat rate basis. With fixed monthly instalment, you can pay for your purchase over a pre-determined period and better manage your cashflow. Please call our hotline at 1800 222 2200 for the latest rates.
|
New Equipment |
Used Equipment |
| Maximum Financing Period |
Up to 7 Years |
Up to 4 Years |
| Maximum Financing Quantum |
Up to 90% of purchase price or valuation |
Up to 80% of purchase price or valuation |
| Interest Rate |
| Commercial |
From 2.8% p.a. flat onwards
|
From 2.8% p.a. flat onwards |
| LEFS up to 4 years |
5.50% p.a. fixed on monthly rest |
5.50% p.a. fixed on monthly rest |
| LEFS 5 to 7 years |
6.00% p.a. fixed on monthly rest |
6.00% p.a. fixed on monthly rest |
Frequently Asked Questions
Purpose
What is Hire Purchase and how does it differ from a Term Loan?
Hire Purchase (HP) is an extended purchase price payment scheme under which the hirer who cannot or does not want to immediately pay for the full price of the goods to the vendor of the goods but desires the immediate use of the good, pays a small part of the price (commonly known as a deposit) first and defer the payment of the remaining balance of the price over a pre-determined period (commonly known as the financing period). Under the HP, the hirer will make regular periodic instalments during the financing period. Until the final instalment is received, the financier retains the title to the goods.
Some key differences between Hire Purchase and Term Loan is illustrated in the table below: -
| Hire Purchase | Term Loan |
| Ownership of Goods |
Hirer acquires ownership title to the goods only after final instalment is paid. |
Borrower acquires ownership title to the goods at the onset of the loan agreement. |
| Interest Rate |
Offered commonly on a flat rate basis. |
Offered commonly on a floating rate basis (e.g. against DBS Prime rate). |
| Documentation |
The financing arrangement is documented by way of a Hire Purchase Agreement (either under HP Act or HP Common Law). |
The financing arrangement is documented by way of a loan agreement and the bank takes a charge over the goods. |
| Registration of legal interest |
DBS registers its legal interests of the goods as a HP owner with the Hire Purchase Association and/or Asset Financing and Leasing Association of Singapore. |
DBS registers its legal interests of the goods as a chargee with the Accounting and Corporate Regulatory Authority Singapore (ACRA). |
| Legal Fees and Stamp Duty |
Does not entail legal fee or stamp duty. |
Entails legal fee in association with the preparation of the loan agreement and stamp duty due to the lodgement of charge with ACRA. |
Types of Equipment and Commercial Vehicles
What types of equipment and categories of commercial vehicles are eligible for Hire Purchase?
| Industry Type |
Types of Equipment |
| Construction |
- Mobile Crane
- Crawler Crane
- Tower Crane
- Excavator
- Bull Dozer
- Wheel Loader
- Crawler Tractor
- Piling Hammers
- Hydralic Boring Rig
- Truck Crane
|
| Precision Engineering |
- Miling Machine
- Lathe
- Machine Center
- Press Brake
- Wire Cut
- Drilling EDM
- Grinding Machine
- Punching Machine
- Laser Cutting Machine
|
| Manufacturing / Industrial |
- Surface Mount Technology (SMT) Equipment
- Compressor
- Generators
- Plastic Injection Machine
- Offset Press
- Binding Machine
- Wood Cutting Machine
|
| Material Handling |
- Forklifts
- Hoists
- Life Truck
- Stacker
|
| Light Commercial Vehicles (under G or Y plates) |
- Commercial Vans
- Lorry Trucks and Pick-Ups
|
| Heavy Commercial Vehicles |
- Truck Cranes
- Concrete Mixer Trucks
- Dump Trucks
- Tankers
- Prime Movers
& Trailers / Low Bed
- Commercial Buses and Coaches
- Tipper Truck
|
Does the bank finance machinery located overseas?
Yes. Please refer to the Internationalisation Finance Scheme for more details.
Interest Rates
What are the different types of interest rates used for Hire Purchase?
Hire Purchase is commonly offered under a flat interest rate scheme. As an alternative, the hirer may apply for HP financing either against DBS Prime rate or apply for HP financing under the Local Enterprise Financing Scheme (LEFS). Please call our Relationship Officers at 1800-222 2200 for the latest rates.
Computation Basis for Flat Interest Rates
What is flat interest rate and how does the bank compute monthly instalment under flat interest rate?
Flat rate means a fixed rate is charged on the full amount financed for the entire hire purchase term. In other words, although the amount financed is expected to run down progressively over time as a result of periodic repayment, these principal repayments are not taken into consideration in the flat rate computation. For computation of monthly instalment, the interest for the whole of the financing period is added to the principal loan at the beginning of the financing period. The monthly instalment is derived using the total amount divided by the number of months comprised in the financing period.
Financing Period for Hire Purchase
What is the maximum financing period that a customer can apply?
For Equipment and Machinery: Up to a maximum financing period of 7 years for new and 4 years for used equipment.
Commercial Vehicles (CV): Up to a maximum financing period of 7 years for new CV. For used CVs, the age of the CV plus the financing period shall not exceed 7 years.
Financing Quantum
How much can a customer apply for under Hire Purchase?
The maximum financing quantum is up to 90% of the purchase price or market value (whichever is lower) for new equipment and commercial vehicles.
The maximum financing quantum is up to 80% of the purchase price or market value (whichever is lower) for used equipment and commercial vehicles.
Prepayment under Hire Purchase
Can a hirer make partial prepayment on the outstanding amount under Hire Purchase?
No, no partial prepayment under HP is permitted.
Can a hirer make full prepayment on the outstanding amount under Hire Purchase? If so, does the Bank impose a prepayment fee?
Full prepayment is permitted and would tantamount to early termination of the HP agreement. No prepayment fee is imposed but for equipment under HP, you are required to furnish the bank a written notice one month prior to termination. For commercial vehicles, no written notice is required.
Rebate of Term Charges
How does the bank determine the amount payable by the Hirer upon request of early termination under Hire Purchase?
For HP offered under flat rates, as the interest/term charges for the entire hire purchase period was used to work out the monthly instalment payable, a term charges rebate (interest) rebate will be given to the Hirer when you fully settle the hire purchase before maturity date. The term charges rebate is computed using the Rule of 78 (commonly known as "Sum of Digits Method") as follows:
n (n+1)
------------ x TC
N (N+1)
Where n = The unexpired hiring period in terms of months
N = The original hiring period in terms of months
TC = The total amount of term charges payable under the HP agreement
Cancellation Fee
Is there any penalty if customer cancels the Hire Purchase after signing the letter of offer?
This is applicable only to Equipment under Hire Purchase. If a HP offer is cancelled at any time after signing the HP agreement, a cancellation fee of 1% shall be imposed on any amount cancelled (partial or full).
Insurance
Does the customer have to insure the goods financed under Hire Purchase?
Yes. For HP (Equipment), the Hirer is required to take up an all-risks insurance policy for an amount up to prevailing market value of the equipment or total principal amount outstanding, whichever is higher. For HP (Commercial Vehicles), the Hirer is required to take up comprehensive insurance policy for an amount up to the prevailing market value of the commercial vehicle or total principal amount outstanding, whichever is higher. In each type of policy, DBS Bank as the Hire Purchase Owner/joint insured and loss payee and borrower as Hirer should be clearly stipulated.