ST Andrews College of Arts, Science and Commerce

TYBBI
Semester –V

Hire purchase & Leasing

Group-4

TOPIC :
Hire purchase & Leasing

Group -IV

Group Members
8207 8218 8229 8246 8214 8241 8244 8247 8253 Bevinda D’costa Etasha Fernandes Flossie Monteiro Divya Salian Pranita D’souza Jesudas Pillai Nishant Rebello George Bush Chiedon Dmonte

ACKNOWLEDGEMENT
We are students of class t.Y.B.B.I. belonging to group No.IV certify that we have completed our project Hire purchase & Leasing on 03th August 2012 of the subject Financial Service Management under the guidance of Prof. Prtricia pereira First and foremost, we would like to thank to our Lecturer, for the valuable guidance and advice. She inspired us greatly to work in this project. Her willingness to motivate us contributed tremendously to our project. We also would like to thank her for showing us some example that related to the topic of our project. And we also thank all the group members who have contributed in making this project.

Thank you Ma’aM Finally, an honourable mention goes to our families and friends for their understandings and supports on us in completing this project. Without helps of the particular that mentioned above, we would face many difficulties while doing this project.

TABLE OF CONTENTS 1 2 3 4 5 6 7 8 9 10 11 12
Introduction of Hire Purchase & Leasing Type of Leasing Features and Benefits of a Leasing ADVANTAGES AND DISADVANTAGE OF LEASING Features and Benefits of a Hire Purchase ADVANTAGES AND DISADVANTAGE OF HIRE PURCHASE DIFFENT METHOD OF HIRE PURCHASE Standard Provisions Of Hire Purchase DIFFERENCE BETWEEN HIRE PURCHASE AND LEASING Case Study Leasing & Hire Purchase Conclusion Bibliography

INTRODUCTION TO LEASING
Leasing, as a financing concept, is an arrangement between two parties, the leasing company or lessor and the user or lessee, whereby the former arranges to buy capital equipment for the use of the latter for an agreed period of time in return for the payment of rent. The rentals are pre-determined and payable at fixed intervals of time, according to the mutual convenience of both the parties. However, the lessor remains the owner of the equipment over the primary period. By resorting to leasing, the lessee company is able to exploit the economic value of equipment by using it as if he owned it without having to pay for its capital cost. Lease rentals can be conveniently paid over the lease period out of profits earned from the use of equipment and the rent is cent percent tax deductible. The fundamental characteristic of a lease is that ownership never passes to the business customer. Instead, the leasing company claims the capital allowances and passes some of the benefit on to the business customer, by way of reduced rental charges. The business customer can generally deduct the full cost of lease rentals from taxable income, as a trading expense. As with hire purchase, the business customer will normally be responsible for maintenance of the equipment.

HISTORY OF LEASING
From the ancient Samarian city of Ur, archaeologists found clay tablets, which documented farm equipment leases from the year 2010 BC. 50 years later, the king of Babylonia in his famous Code of Hammurabi enacted the first leasing laws. The ancient civilizations of Egypt, Greece and Rome engaged in leasing transactions of real and personal property, while the Phoenicians actively promoted leasing by chartering ships to local merchants. Leasing first appeared in the United States in the 1700‘s to finance the use of horse-down wagons. By the mid-1800‘s, railroad tycoons, involved third-party investors who would pool their funds, purchase railroad cars from a manufacturer, then lease the cars to the railroad in the form of ―equipment trust certificates‖. In the early 1900‘s, companies began to act as lessors for equipment by leasing it out while maintaining title to it. Often, the lessees would be shippers who wanted control over their shipments without ownership. This method introduced the operating or true lease concept. Meanwhile, other manufacturers were looking for additional ways to sell their merchandise. They thought of installment sale, which allowed consumers and commercial markets to augment their purchasing power by paying for equipment over time.

TYPE OF LEASING

Finance Leasing The finance lease or 'full payout lease' is closest to the hire purchase alternative. The leasing company recovers the full cost of the equipment, plus charges, over the period of the lease. Although the business customer does not own the equipment, they have most of the 'risks and rewards' associated with ownership. They are responsible for maintaining and insuring the asset and must show the leased asset on their balance sheet as a capital item. When the lease period ends, the leasing company will usually agree to a secondary lease period at significantly reduced payments. Alternatively, if the business wishes to stop using the equipment, it may be sold second-hand to an unrelated third party. The business arranges the sale on behalf of the leasing company and obtains the bulk of the sale proceeds.

Operating Leasing If a business needs a piece of equipment for a shorter time, then operating leasing may be the answer. The leasing company will lease the equipment, expecting to sell it secondhand at the end of the lease, or to lease it again to someone else. It will, therefore, not need to recover the full cost of the equipment through the lease rentals. This type of leasing is common for equipment where there is a well-established secondhand market (e.g. cars and construction equipment). The lease period will usually be for two to three years, although it may be much longer, but is always less than the working life of the machine Assets financed under operating leases are not shown as assets on the balance sheet. Instead, the entire operating lease cost is treated as a cost in the profit and loss account.

Contract Hire: Contract hire is a form of operating lease and it is often used for vehicles. The leasing company undertakes some responsibility for the management and maintenance of the vehicles. Services can include regular maintenance and repair costs, replacement of tyres and batteries, providing replacement vehicles, roadside assistance and recovery services and payment of the vehicle licenses

Sale and Lease Back and Direct Lease: In the arrangement of sale and lease back, the lessee sells his asset or equipment to the lessor (financier) with an advanced agreement of leasing back to the lessee for a fixed lease rental per period. It is exercised by the entrepreneur when he wants to free his money, invested in the equipment or asset, to utilize it at whatsoever place for any reason. On the other hand, direct lease is a simple lease where the asset is either owned by the lessor or he acquires it. In the former case, the lessor and equipment supplier are one and the same person and this case is called ‗bipartite lease‘. In bipartite lease, there are two parties. Whereas, in the latter case, there are three different parties viz. equipment supplier, lessor, and lessee and it is called tripartite lease. Here, equipment supplier and lessor are two different parties.

Single Investor Lease and Leveraged Lease: In single investor lease, there are two parties - lessor and lessee. The lessor arranges the money to finance the asset or equipment by way of equity or debt. The lender is entitled to recover money from the lessor only and not from the lessee in case of default by lessor. Lessee is entitled to pay the lease rentals only to the lessor. Leveraged lease, on the other hand, has three parties – lessor, lessee and the financier or lender. Equity is arranged by the lessor and debt is financed by the lender or financier. Here, there is a direct connection of the lender with the lessee

and in case of default by the lessor; the lender is also entitled to receive money from lessee. Such transactions are generally routed through a trustee.

Domestic and International Lease (Cross Border lease): When all the parties of the lease agreement reside in the same country, it is called domestic lease. International lease are of two types – Import Lease and Cross Border Lease. When lessor and lessee reside in same country and equipment supplier stays in different country, the lease arrangement is called import lease. When the lessor and lessee are residing in two different countries and no matter where the equipment supplier stays, the lease is called cross border lease.

Capital lease: It is a lease obligation that has to be capitalized on the balance sheet. It is characterized by: it is non-cancellable; the life of lease is less than the life of the asset being leased: and, the lessor does not pay for the upkeep, maintenance , or servicing costs of the asset during the lease period.

Sub-lease: A transaction in which leased properly is released by the original lessee to a third party, and the lease agreement between the two original parties remains in effect.

Features and Benefits of a Leasing

Leasing allows you to drive a bigger, better, newer vehicle more often, with a smaller financial commitment than a personal loan, because you are only paying for the portion of the car you are using during the lease term. Typical features of a car lease include. Repaying only what you use. The monthly repayments of a lease are calculated on the vehicle‘s depreciation during the lease term. Must have a balloon. The balloon payment reflects what your vehicle is expected to be worth at the end of the loan term. so the sale of the vehicle should pay out your balloon. With a lease you must set a balloon amount, for example a 3 year lease may have a 45% residual balloon, a four year lease could have a 35% residual and a 5 year lease may only be able to have a 25% residual. Higher insurance costs. The cost of insuring a leased vehicle as opposed to one you own outright can be higher. You can keep the vehicle. At the end of the lease term you are able to make an offer on the vehicle to buy it, and this amount will need to come from your pocket. Vehicle value. You may also have to pay an amount out of your pocket if there is a difference between the residual value and the market value of the vehicle at the end of the lease term. This could be due to unexpected wear and tear on the vehicle, or higher miles which diminish its value. Limited miles. A lease may impose a limit on the number of miles you can travel during the lease term and the more miles you drive, the more expensive your lease can be. In some cases there are additional charges payable at the end of the lease if you go over the limited miles. At the same time, the more miles

a vehicle has done, the lower its resale is so even if your lease has unlimited miles, keep your residual value in mind.

ADVANTAGES AND DISADVANTAGE OF LEASING.

Advantages of Leasing
1. No Large Outlay The biggest advantage of leasing equipment is that the cost is spread over a number of years; there is no need for you to pay the entire amount upfront. This can significantly help maintain cash flow, which is critical to all businesses. Poor cash flow is the main cause of small business failures, and leasing can help you to keep it under better control. Leasing can also allow you to use better equipment (e.g. A more efficient / faster / more accurate product) that would be too expensive to buy outright. 2. Security When you lease a product, it is still owned by the leasing company, meaning that they have better security on your finance. This means you are unlikely to need any further security to be able to start a leasing contract, and therefore you have a much better chance of acceptance (passing the credit check) than with other forms of finance. 3. Tax Advantages Lease rentals are considered as an operating cost, which means that it is often possible to deduct them from taxable profits (as a trading expense). However, you should always check that the equipment you are buying is eligible before agreeing to a contract. If your business pays no or minimal taxes, then some leasing companies will claim the capital allowance on your behalf, and lower the leasing costs accordingly.

4. Budgeting As a lease agreement is almost always a fixed contract, it is relatively easy to budget and forecast with. The amount can be worked into your businesses budget much more easily than an irregularly occurring lump sum; allowing you to keep a much better control over current and future cash flow. In the event that you need an item replacing quickly, you can do so with a relatively minor monthly adjustment to the budget, instead of a lump sum that could seriously damage cash flow.

Disadvantages of Leasing
1. No Ownership The main disadvantage of leasing is that you never own the product. It remains the property of the leasing company during and after the lease. The only exception being if you arrange for it to be sold to another company or person, in which case the leasing company would receive the money and a percentage would be passed back to you (depending on the amount, product type, age, and which leasing company you use). As you do not own the product, you are unable to sell it in the event it is no longer needed, and you cannot upgrade to a newer or better product without either paying off the remaining contract, or paying a large fee to cancel the contract. You also need to carry on paying a smaller lease cost, even after the cost of the equipment has been fully covered. Hire purchase will allow you to own the product at the end of the agreement, but this is normally more difficult to arrange, and is often available only on highly costly items. 2. Long Term Expense Although leasing allows you to avoid paying a large lump sum, over a long period of time it often works out considerably more expensive. Over the course of a standard lease, you pay the cost of the equipment as well as the leasing companies charges.

After the lease finishes you need to carry on paying rental to use the product (although after the initial lease the cost of rental goes down significantly). This means that over a number of years, you will pay considerably more than the actual cost of the equipment without ever actually owning it. 3. Maintenance Although you do not own the equipment that you lease, you are still responsible for its maintenance and repair. Unless you have specifically trained employees to fix the equipment, then this could prove very costly in the event of a serious fault. Some leasing companies will allow you to cover the maintenance and repair costs for an extra sum (which is added to the monthly leasing cost). This will increase your monthly payments, but may save you money in the long run; particularly with manual or highly technical products that may go wrong frequently, and may cause severe disruption if out of action. Cover is normally through the leasing company itself, or through a separate insurance policy. Car leasing is slightly different, as many of these agreements include basic maintenance. However, it is vitally important to check, as some will not include it in the basic price, and the terms and conditions will vary with each leasing company. 4. Lost tax benefits: A potential disadvantage of leasing is losing the tax benefits of depreciation deductions that come with ownership. This disadvantage may be insignificant, however, if the ―lost‖ benefits are offset by deduction of rental payments or if revenue income is less or tax liability is less anyways because of other factors of taxation.

INTRODUCTION TO HIRE PURCHASE
Hire purchase is a type of installment credit under which the hire purchaser, called the hirer, agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of principal as well as interest, with an option to purchase. Under this transaction, the hire purchaser acquires the property (goods) immediately on signing the hire purchase agreement but the ownership or title of the same is transferred only when the last installment is paid. The hire Purchase Act, 1972 defines a hire purchase agreement as, ‗an agreement under which goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of the agreement and includes an agreement under which:a) Possession of goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical installments, and b) the property in the goods is to pass to such person on the payment of the last of such installments, and c) such person has a right to terminate the agreement at any time before the property so passes.

HISTORY OF HIRE PURCHASE
Hire purchase has been there in India for more than 6 decades. The first hire purchase company is believed to be Commercial Credit Corporation, successor to Auto Supply Company. This company was based in Madras. In north India, Motor and General Finance and Installment Supply Company was set up. This was around 1925. Consumer durables hire purchase was promoted by the dealers in the equipment. Singer Sewing Machine or Murphy radio dealers would provide installment facilities on hire purchase basis to the customers of their products. Hire purchase of commercial vehicles also has flourished fast.

Features and Benefits of a Hire Purchase
When you enter into a hire purchase arrangement, your financier is agreeing to purchase equipment – or a vehicle – on your behalf, and then hire it back to you over a set term. This means you have the use of the vehicle during that term, but don‘t own it. Other features of a hire purchase include: A loan term of between three and five years. As part of the hire agreement you can choose how long you want to hire your vehicle back for. You own the vehicle at the end. At the end of a hire purchase agreement, once you have made your final payment and any balloon payment you implemented, the vehicle is automatically yours. Upfront costs. When you first enter into a hire purchase you will need to make an initial loan payment and pay a deposit, stamp duty and registration fees. In some cases you can negotiate that some of these fees be added to the hire amount. Full monthly repayments. The monthly repayments due on your hire purchase will be calculated on the total amount of the purchase price, plus interest charges, duties and other loan fees. Do you want a balloon? With a hire purchase you can choose whether or not to have a balloon payment due at the end of the loan term. Having a balloon payment will lower your monthly repayments, but this amount will be payable at the end of the term, and you need it to correlate to the market value of the vehicle at the time. More expensive insurance. When you are hiring a vehicle rather than buying it outright, your insurance company can often impose higher premiums. Keep, sell or refinance your hire purchase. At the end of the hire purchase term you can keep the car after you make your final payment and pay out any balloon. You can also sell or trade in the vehicle, but the risk of dropping

value now become yours. Or you can refinance the balloon amount over a new term if you want to keep the vehicle for a few more years. Unlimited miles. There are no limits to the miles you can put on the clock with a hired vehicle, but just keep in mind that the more miles the vehicle has, the lower its value will be at the end of the hire term. Tax benefits. With a hired vehicle you are able to claim depreciation of the purchase price, plus the interest charges on your loan, and the ongoing running costs of the vehicle, based on the percentage of business use.

ADVANTAGES AND DISADVANTAGE OF HIRE PURCHASE.

Advantages of Hire Purchase
Spread the cost of finance. Whilst choosing to pay in cash is preferable, this might not be possible for consumer on a tight budget. A hire purchase agreement allows a consumer to make monthly repayments over a pre-specified period of time. 1) Interest-free credit Some merchants offer customers the opportunity to pay for goods and services on interest free credit. This is particularly common when making a new car purchase or on white goods during an economic downturn. 2) Higher acceptance rates The rate of acceptance on hire purchase agreements is higher than other forms of unsecured borrowing because the lenders have collateral; 3) Sales A hire purchase agreement allows a consumer to purchase sale items when they aren't in a position to pay in cash. The discounts secured will save many families money; 4) Debt solutions Consumers that buy on credit can pursue a debt solution, such as a debt management plan, should they experience money problems further down the line.

Disadvantages of Hire Purchase
1) Personal debt A hire purchase agreement is yet another form of personal debt it is monthly repayment commitment that needs to be paid each month. 2) Final payment A consumer doesn't have legitimate title to the goods until the final monthly repayment has been made. 3) Bad credit. All hire purchase agreements will involve a credit check. Consumers that have a bad credit rating will either be turned down or will be asked to pay a high interest rate; 4) Creditor harassment Opting to buy on credit can create money problems should a family experience a change of personal circumstances. 5) Repossession rights A seller is entitled to 'snatch back' any goods when less than a third of the amount has been paid back. Should more than a third of the amount have been paid back, the seller will need a court order or for the buyer to return the item voluntarily.

Different Method of Hire purchase

Function Hire purchases are used to acquire houses, automobiles, furniture, and other large items that generally cannot be paid in a lump sum. Hire purchases function as legal documents for which the lender can legally hold the title until the item is paid in full.

Types A hire purchase can be an installment or deferred payment plan. In the former, a set monthly payment is paid on a certain day each month for a specified length of time. After the last payment, the item becomes the purchaser's property. In the latter, the property immediately belongs to the purchaser while payments are regularly made.

Time Frame A hire purchase can be for a few months up to many years. The interest rate can vary from low to high, depending on the institution granting the agreement. Usually, a more expensive item will be set up for 10, 15, or more years. Typically, a mortgage covers a span of 30 years.

Facts To be valid, a hire purchase must be signed by both parties. It should contain a description of the item, the price paid, the deposit (if any), monthly amounts due, statement of each party's rights, and requirements, if any, for early termination.

Benefits Hire purchase allows a person to buy an item, such as a house, over a long period of time. With such an agreement, the buyer can enjoy his property while making payments. The buyer also has the right to sell the property and allow the new purchaser possession of his house.

Warning If the purchaser fails to make the installments in a timely manner, the lender has the right to repossess the property or item. In severe cases, the purchaser may file for foreclosure or bankruptcy, at which time the item's ownership will be returned to the lender.

Considerations Generally, a person must be at least 18 years of age to enter into a valid hire purchase. There is no upper age limit to incurring such a purchase agreement. Each person should carefully consider his financial position before incurring any type of hire purchase.

Standard Provisions of Hire Purchase
To be valid, HP agreements must be in writing and signed by both [parties].They must clearly lay out the following information in a print that all can read without effort: 1. A clear description of the goods 2. The cash price for the goods 3. The HP price, i.e., the total sum that must be paid to hire and then purchase the goods 4. The deposit 5. The monthly instalments (most states require that the applicable interest rate is disclosed and regulate the rates and charges that can be applied in HP transactions). 6. A reasonably comprehensive statement of the parties' rights (sometimes including the right to cancel the agreement during a "cooling-off" period). 7. The right of the hire to terminate the contract when he feels like doing so with a valid reason. The seller and the owner If the seller has the resources and the legal right to sell the goods on credit (which usually depends on a licensing system in most countries), the seller and the owner will be the same person. But most sellers prefer to receive a cash payment immediately. To achieve this, the seller transfers ownership of the goods to a Finance Company, usually at a discounted price, and it is this company that hires and sells the goods to the buyer. This introduction of a third party complicates the transaction. Suppose that the seller makes false claims as to the quality and reliability of the goods that induce the buyer to "buy". In a conventional contract of sale, the seller will be liable to the buyer if these representations prove false. But, in this instance, the seller who makes the representation is not the owner who sells the goods to the buyer only after all the instalments have been paid. To combat this, some jurisdictions, including Ireland, make the seller and the finance house jointly and severally liable to answer for breaches of the purchase contract

Implied warranties and conditions to protect the hirer The extent to which buyers are protected varies from jurisdiction to jurisdiction, but the following are usually present: 1. The hirer will be allowed to enjoy quiet possession of the goods, i.e. no-one will interfere with the hirer's possession during the term of this contract 2. The owner will be able to pass title to, or ownership of, the goods when the contract requires it 3. That the goods are of merchantable quality and fit for their purpose, save that exclusion clauses may, to a greater or lesser extent, limit the Finance Company's liability Where the goods are let by reference to a description or to a sample, what is actually supplied must correspond with the description and the sample.

The hirer's rights The hirer usually has the following rights: 1. To buy the goods at any time by giving notice to the owner and paying the balance of the HP price less a rebate (each jurisdiction has a different formula for calculating the amount of this rebate) 2. To return the goods to the owner — this is subject to the payment of a penalty to reflect the owner's loss of profit but subject to a maximum specified in each jurisdiction's law to strike a balance between the need for the buyer to minimize liability and the fact that the owner now has possession of an obsolescent asset of reduced value 3. With the consent of the owner, to assign both the benefit and the burden of the contract to a third person. The owner cannot unreasonably refuse consent where the nominated third party has good credit rating 4. Where the owner wrongfully repossesses the goods, either to recover the goods plus damages for loss of quiet possession or to damages representing the value of the goods lost.

The hirer's obligations The hirer usually has the following obligations: 1. To pay the hire instalments 2. To take reasonable care of the goods (if the hirer damages the goods by using them in a non-standard way, he or she must continue to pay the instalments and, if appropriate, compensate the owner for any loss in asset value) 3. To inform the owner where the goods will be kept. 4. A hirer can sell the products if, and only if, he has purchased the goods finally or else not to any other third party. It is pretty much similar to instalment but the main difference is of ownership.

The owner's rights The owner usually has the right to terminate the agreement where the hirer defaults in paying the instalments or breaches any of the other terms in the agreement. This entitles the owner: 1. to forfeit the deposit 2. to retain the instalments already paid and recover the balance due 3. to repossess the goods (which may have to be by application to a Court depending on the nature of the goods and the percentage of the total price paid) 4. to claim damages for any loss suffered.

DIFFERENCE BETWEEN HIRE PURCHASE AND LEASING

Hire purchase is also different from leasing: 1) Ownership: In a Contract of lease, the ownership rests with the lesser throughout and the lease has no option purchase the goods. 2) Method of Financing: Leasing is method of financing business assets whereas hire purchase is a method of financing both business assets and consumer articles. 3) Depreciation:

In leasing, depreciation and investment allowance cannot be claimed by the lessee, In hire purchase, depreciation and investment allowance can be claimed by the hirer. 4) Tax Benefits: The entire lease rental is tax deductible expense. Only the interest component of the hire purchase instalment is tax deductible. 5) Slavage Value: The lessee, not being the owner of the asset, does not enjoy the salvage value of the asset. The hirer, in purchase, being the owner of the asset, enjoys salvage value of the asset. 6) Deposit: Lessee is enquired to make any deposit whereas 20% deposit us required in hire purchase. 7) Rent-Purchase:

With lease, we rent and with hire purchase we buy the goods. 8) Extent of Finance: Lease financing is invariably 100 percent financing, It requires no immediate down payment or margin money by the lessee. In hire purchase a margin equal to 20-25 percent of the cost of the asset is to be paid by the hirer. 9) MAINTENANCE: The cost of maintenance of the hired asset is to be borne by the hirer himself. In case of finance lease only, the maintenance of leased asset is the responsibility of the lesse.

CASE STUDY LEASING
CSI Leasing Customer
  

Performs complex data analysis from oil and gas exploration findings Headquartered in the southern U.S., with operating divisions on three continents and five countries Maintaining the most current technology systems critical to business model

The Problem The primary reason this company leases technology is to stay current. A cornerstone of their competitive advantage lies in the ability to quickly compute complicated data and statistical analysis. Yet, with each global division choosing technology lessors autonomously, the corporate headquarters was burdened with a variety of problems. There was little consistency in lease terms and conditions, or in the way leases were accounted for financially. Despite a corporate policy mandating that all leases comply with U.S. FASB 13 treatment for operating leases, the different international structures made it nearly impossible for the corporate accounting group to validate compliance. The Solution Our customer‘s goals for each international operating division were: pre-negotiated terms, consistent lease rates worldwide and a refresh schedule determined by the corporate office. Already enjoying a long-term relationship with CSI Leasing for the U.S. operations, the CIO and CFO turned to CSI to examine a global technology leasing solution. Their CSI account executive took on the role of global account manager, and worked inside CSI to set up a consistent global program. How We Did It Because their U.S. account executive has direct access to our international administration group, it was not difficult to make this happen. We established a single worldwide program to meet each of our customer‘s goals. By negotiating all terms and lease rates globally, we were able to help our customer meet their FASB 13 requirements, while also allotting for differences in local tax laws. Eliminating poor choices on a local level also helped our customer increase

operational efficiencies. With two dedicated CSI lease administrators worldwide (one for all of North America and one for Europe), they now have a consistent and personal support team for ordering and documentation procedures. Additionally, the corporate technology group enjoys the ability to view global leased asset details through My CSI in each location. For this customer, the synergies from having a consistent theme worldwide show from an accounting, operations and competitive standpoint.

Case Study Hire Purchase
This study attempts to analyze the quantitative as well as qualitative information to identify and evaluate the performance and current state of affairs of finance companies in the field of hire purchase financing in Pokhara. The study reveals that the credit-deposit ratios are very satisfactory. The relationship between total deposit collection and total loan to hire purchase loan is highly significant. The businessperson and professional users are predominantly rushing in utilizing the hire purchase financing due to the easy payment terms. The IRR on hire purchase loan is normally higher than their explicit rate of interest and service charge. Except in few cases, there are loan defaulters in all finance companies. In general, the performance of finance companies in hire purchase financing is satisfactory. The Commonest method OF selling property is the cash sale. The credit sale system is an alternative method of cash sale. The third system of selling property is the instalment system. In, installment system, property are delivered to the buyer immediately but payments is made in periodic installments such as weekly or monthly, quarterly or half-yearly or yearly so on. Hire purchase and installment purchase systems are the major parts of installment system. However, hire purchase installment system is the prime concern of this study. With an increasing demand for better life, the consumption of property has been on the uprising scale. This has not been backed up by adequate purchasing power, transforming it into effectual demand (Mukharjee and Hanif 1998). This has created the market for hire purchase system. When a person is unable to acquire an asset against immediate cash payment, he may arrange with the vendor to stagger the payment. Financial institution plays role of facilitators between buyer and seller to enter into the hire purchase agreements. Hirepurchase agreement makes it possible for businesspersons, professionals and others to take advantage of assets all of which enable them to organize and operate their activities effectively. After the liberalization policy introduced in 1990, the financial sector especially the finance companies have contributed significantly to increase the hire purchase business in Nepal. In this study, therefore, an attempt has been made to analyze the current performance of finance companies in Pokhara in the field of hire purchase financing.

Conclusion
Today asset based financing has formed an integral part of the Financing scenario. This is because firms today can‘t afford to buy the equipments/ machines outright. Not all fir ms to day are that financially sound. Today fir ms find it extremel y difficult to obtain financial aid from the normal sources. Firms that have the financial capacity prefer to hire/lease the equipments it releases the financial burden as well as provides tax benefit of depreciation. Especially Project financing has come of age as most of the banks today are into project financing. Earlier it was chartered accountants who indulged into project financing but now it is more of bank involvement. But today the growth in Project Finance is low where as leas e and hire purchase are on a upward trend with more and more companies like Bajaj, Hero Honda providing their products on hire. So in the changing economic and financial environme nt of India, asset based financing has assumed an extremely important role.

Bibliography

Roll No 8207 8214 8217 8229 8241 8244 8246 8247 8253

Name Bevinda D’costa Pranita D’souza Etasha Fernandes Flossie Monterio Jesudas Pillai Nishant Rebello Divya Salian George Bush Chiedon Dmonte

Search Google www.scride.com Google Google Google & Dipak Abhyankar Google Google Google

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