At the end of the primary period you normally have three options, set out in your agreement: continue using the asset in a secondary rental period at a reduced rental, sell it to an unconnected third party as the lender’s agent, or return it. Ownership does not pass to you automatically, because the lender holds title throughout.
If the asset is sold, the agreement usually provides for you to receive an agreed share of the proceeds, commonly paid as a rebate of rentals. The share, and who arranges the sale, differ between lenders. If you return the asset, it will need to meet the condition requirements in the agreement, and you may be recharged for damage beyond fair wear and tear.
A few things to check well before the term ends:
- What the secondary rental would be, and how long it can continue.
- Whether you are required to arrange a sale, and on what terms.
- The condition and, for vehicles, mileage standards you will be measured against.
- Any documentation or notice period the lender requires.
If you want to keep using the equipment long term, it is worth reviewing your options several months before the end date. Hire purchase or refinance may be more appropriate next time if ownership matters to you. End-of-term terms vary by lender, so always work from your own agreement rather than a general summary.