HIRE PURCHASE

INTRODUCTION

Hire Purchase Act 1967 is applicable to all business of hire purchase in Malaysia. Hire Purchase Act
1967 was adapted from Hire Purchase Act 1960 New South Wales, Australia and was amended
several times down before this. All hire-purchase agreement shall satisfy the procedures relating to
the establishment of a hire purchase agreement. Hire purchase also mentions conditions and
warranties, merchantability and fitness articles for the hire purchase agreement. It also lists the
statutory rights of tenants, secured rights and procedures for repossession of goods under a hire
purchase agreement.

HIRE-PURCHASE ACT 1967

“An Act to regulate the form and contents of hire-purchase agreements, the rights and duties of
parties to such agreements and to make provisions for other matters connected therewith and
incidental thereto. “

(MALAYSIA, 2012)

Definition of hire purchase

compliance with Sections 2 of the act of hire purchase, hire purchase agreement included allowing
goods with an option to purchase agreement and an agreement for the purchase of goods by
instalments (whether the agreement stated instalments as rent or otherwise) but does not include
any agreement:

A) In which the property in the goods passes contained within the agreement or during or at any
time prior to the delivery of goods or

B) People renting or buying goods is a person engaged in a trade or business of selling the same
goods or description of the items contained in the agreement.

Hire purchase concept as specified in Section 2 means tenants will only receive title to the goods
after all instalments have been paid to the owner.

Definition of hirer in accordance with the Act is the person who takes or has taken goods from the
owner under a hire purchase agreement and include the person to whom the rights or liabilities, the
liabilities of the tenant under a hire purchase agreement have been assigned or enforced by law.

While the definition of the owner is the person who authorized or allowed goods to the hirer under
a hire purchase agreement and include the person to whom the rights or liabilities of the owner
under the agreement have been assigned or enforced by law. In the case of Arab-Malaysian Finance
Bhd v Samian Bin Sabin & Anor. The Court stated that the owner means a person who hire out or
has hire out goods (buses in this case) under hire purchase agreements and these include one to
which the rights and liabilities under the agreement has been given the assignor or by law.
The owner has the right to take back the goods if the instalment is not paid according to the hire
purchase agreement. In the case of Tractor Malaysia Bhd v Kumpulan Pembinaan Malaysia
Sdn.Bhd. A hire purchase agreement has been made between appellant and respondents to a
bulldozer. Respondent fails to pay the agreed instalment and the bulldozer was taken aback by the
appellant. Respondents later pay the original instalment in arrears and bulldozer it is returned to the
respondent. Respondents once again failed to pay the instalment. Appellant demanding tray
bulldozer taxable price paid, boarding and compensation. Respondent denied on grounds that
agreement between the appellant and the respondents are regular sales and instead hire purchase.
The court ruled that the transaction between the appellant and the respondent is hire purchase
because both parties agree that ownership will only move when full payment is settled. With the
appellant was entitled to enforce the rights of repossession if the respondent fails to pay in
instalments.

While in the case of Credit Corp. (M) Bhd v Industrial Finance Corp & others. The High Court
decided that the agreement between the plaintiff and the first tenants are subject to hire purchase
and Hire Purchase Act 1967. Therefore, the ownership of the car will not move to the tenant until he
made the choice to buy a car that is by paying all the instalments set and comply regulation hire
purchase agreement.

Contained in section 9-15 ASB, statutory rights of hirer are the right to obtain information, rights to
distribution fees, the right to move goods, the right to assign the goods, the right to deliver the
goods by operation of law, early settlement, and termination of the agreement.
STATUTORY RIGHTS OF THE HIRER

1.0 Duty of owners and sellers to supply documents and information

Section 9. (1)

At any time before the final payment has been made under a hire-purchase agreement the owner
shall, within fourteen days after he has received a request in writing from the hirer, supply to the
hirer a statement signed by the said person or his agent showing—

(a) The amount paid to the owner by or on behalf of the hirer (agent)

(b) The amount which has become due under the agreement but remains unpaid;

(c) The amount which is to become payable under the agreement; and

(d) The amount derived from interest on overdue instalments:

However this right can only be exercised not more than once in three month. If the hire makes such
requests more than once in three month, the owner can refuse the comply.

Under normal circumstance, the owner is obliged to comply with the hirer’s request within fourteen
days of receipt of such request. If he fail to comply ‘without reasonable cause’ and so long as such
default continues, the owner cannot enforce the agreement against the hirer or exercise any right to
recover the goods from the hirer or any contract of guarantee relating to the agreement. If the
default aforesaid continues for a period for one month, the owner shall be guilty of an offence and
shall, on conviction, be liable to a fine not exceeding RM200-section 9(2) and (3), Hire-Purchase Act
1967.

Section 9. (2)

In the event of a failure without reasonable cause to comply with subsection (1) then, while the
default continues—

(a) The owner shall not be entitled to enforce—

(i) The agreement against the hirer;

(ii) Any right to recover the goods from the hirer

(iii) Any contract of guarantee relating to the agreement

(b) Any security given by the hirer in respect of money payable under the agreement or given by a
guarantor in respect of money payable under such a contract of guarantee as aforesaid shall not be
enforceable against the hirer or the guarantor by any holder thereof.

Section 9(3) If the default aforesaid continues for a period of one month, the owner shall be guilty of
an offence and shall, on conviction, be liable to a fine not exceeding one thousand ringgit.
2.0 Rights to distribution fees

Section 10

A hirer who is liable to make payments in respect of two or more hire-purchase agreements to the
same owner shall, notwithstanding any agreement to the contrary, be entitled, on making any
payment in respect of the agreements which is not sufficient to discharge the total amount then due
under all the agreements, to require the owner to appropriate the sum so paid by him in or towards
the satisfaction of the sum due under any one of the agreements, or in or towards the satisfaction of
the sums due under any two or more of the agreements in such proportions as he thinks fit, and, if
he fails to make any such appropriation as aforesaid, the payment shall by virtue of this section be
appropriated towards the satisfaction of the sums due under the respective hire-purchase
agreements in the order in which the agreements were entered into.

Based on this provision, this distribution rights to payment exists when a hirer enters more than a
hire purchase agreement under the same owner. When the hirer makes a payment in respect of the
agreement not sufficient to release the full amount payable under the agreement. The owner will
use the money paid by a hirer to a settlement amount payable under any agreement or in one or
settlement amount payable under two or more agreements in accordance with section considers
appropriate

The goal is to provide facilities to tenants who entered more than a hire purchase agreement to
distribute payments to any agreement if he cannot pay all the sums that have been set . Through
this provision, hirer can apply from the owner to distribute payments who felt he could afford to pay
it.

3.0 Power of court to allow goods to be removed.

Section 11

Where, by virtue of a hire-purchase agreement, it is the duty of a hirer to keep the goods comprised
in the agreement in his possession or control at a particular place or not to remove the goods from a
particular place, a court of a Magistrate may, on the application of the hirer, make an order
approving the removal of the goods to some other place, which place shall, for the purposes of the
agreement, be substituted for the place mentioned in the agreement.

Every hire purchase agreement provides that hirer shall keep the goods purchased on the spot
agreed in the agreement. if the hirer move the goods to another place, then it is considered as a
breach of the agreement and consequently the owner of the rights to repossess the goods. In this
case, if the tenant wants to move the goods to a place other than the agreed then the application
must be submitted to the Court of Magistrates as described in section 10 of the Hire Purchase Act
above.
The hirer has the right to make an application to a court of a Magistrate to move their belongings to
another place. Therefore, if the Magistrate's Court to allow the transfer, the new venue will be
replaced with the place agreed in the agreement.

4.0 Assignment of right under hire purchase agreements.

Section 12(1)

Provides that the rights, title and interests of tenants under a hirer purchase agreement may be
assigned to another person with the consent of the owner, or his consent is unreasonably withheld,
without his consent.

In section 12(2)

There are no payment or any other consideration can be required by an owner of his consent as
mentioned in the subsection (1) except than what is provided under this section. When an owner
needs payment or any other consideration for his consent, that consent should be categorized as
unreasonably withheld.

Under subsection (3)

if the hirer requested under the hire purchase agreement that the hirer does not want or refuse to
give his consent to the tenant or his right, title and interest, then the hirer may apply to the High
Court to get a declaration that the agreement to the hirer of the assignment are reasonably withheld
and where the order made that consent must be categorized as unreasonably withheld.

As a condition of granting consent to an assignment of the rights, title and interest of the hirer under
a hire purchase agreement, the owner may stipulate that all defaults under the agreement should be
made good and may require the hirer and assignee –

a) To execute and deliver to the owner of the assignment in a form that has been approved by the
owner where it should not affect the continuity of personal liability of the hirer in those respects, the
assignee agree with the owner to be personally liable to pay the remaining instalments that haven’t
been paid yet and to perform and observe all other stipulations and conditions of the regulated
agreement during the residue of the term and whereby the assignee indemnifies the hirer in respect
of those liabilities and;

b) To pay reasonable cost that incurred by owner in stamping or registering the assignment
agreement or counterparts.

To explain this section, the hirer under a regulated agreement may, by notice in writing to the owner
require the owner to assign his right, title and interest under the agreement to another person. As a
condition, the owner may stipulate that all defaults under the agreement shall be made good and it
requires the hirer and the assignee to deliver to the owner of a form of assignment where assignee
is agree to pay to the owner of the net balance due under the agreement and to pay the owner any
reasonable cost that incurred by the owner.
Except as stated in this section, no payment or any consideration should be required by owner for an
assignment referred to in subsection (1) where an owner who fails or refuses to assign his rights,
title and interest under the agreement as required by the hirer in accordance with this section then
the hirer may apply to a court for an order requiring the owner to assign his rights, title and interest
under the regulated assignment.

5.0 To have his right, tittle and interest passed on by operation law

Section 13 described:

The right, title and interest of a hirer under a hire-purchase agreement shall be capable of passing by
operation of law to the personal representative of the hirer and if the hirer is a company the
liquidator may exercise the same right under the agreement as the company but nothing in this
section shall relieve any personal representative or liquidator from compliance with the provisions of
the agreement.

In the case of death, the tenant becomes insolvent and unable to pay the amount of the payment to
be solved on the rented goods, then all these rights can be transferred to a representative, trustee
or beneficiary of tenants through the process of law enforcement.

Means that, the hirer possesses the right to have his right, tittle and interest passed on to his
personal representatives in the event of his death. And if the hirer is a company, if it is being wound
- up, the hirer’s right, tittle and interest possess on to the liquidator. The personal representatives
and liquidator would then be bound by and have to comply with the terms of the agreement.

6.0 Early completion of the agreement.

In section 14(1),

The hirer under a hire purchase agreement may complete the purchase of the goods by paying or
tendering to the owner the net balance due under the agreement id he has given notice in writing to
the owner of his intention to do so on or before the day specified for that purpose in the notice.

For the purpose of subsection (1), the term charges in the hirer purchase agreement should be at
fixed rate where the net balance due is the balance originally payable under the agreement less –

a) Any amount paid or provided by or on behalf of the hirer under the agreement.

b) The statutory rebate for term charges.

c) If the hirer requires any contract of insurance to be cancelled, the statutory rebate for
insurance.

Besides fixed rate, when the term charges is at a variable rate, the net balance due is the
outstanding amount financed and terms charges accrued and was calculated up to the next due date
of payment less, if the hirer requires any contract of insurance to be cancelled, the statutory rebate
for insurance.

If the hirer requires any contract of insurance to be cancelled, the statutory rebate for insurance.

It is stated in the subsection (3) that the rights conferred on the hirer by this section may be
exercised him by at any time during the continuance of the agreement or where the owner has
taken possession of the goods, upon payment to the owner within twenty-one days after the owner
has served a notice in the form set out in the Fifth Schedule in addition to the net balance due
together with the reasonable costs including costs of storage, repair or maintenance of the goods
incurred by the owner incidental to his taking possession of the goods or where the hirer has
returned the goods to the owner within twenty-one days after the service on him of the notice in the
from set out in the Fourth Schedule, upon payment to the owner within twenty-one days after the
owner has served a notice in the form set out in the Fifth Schedule the net balance due under the
Act.

7.0 Power of hirer to determine hiring

Section 15. (1)

Enables the hirer to terminate the hire-purchase agreement at any time. This is done by returning
the goods to the owner during ordinary business hours at the place where the owner ordinary
business hours at the place at which the owner ordinarily carries on business or to the place
specified for that purpose in the agreement. The Act does not require any written notice to be given
to the owner. However, if the terms of the agreement stipulate such a procedure, then the hirer is
required to comply with the said procedure.

In Leong Weng Choon v Consolidated Leasing (M) Sdn Bhd [1998] 3 AMR 3133, the Court Appeal
reiterated that ‘the only way under the Hire Purchase Act for a hirer to determine the agreement
ahead of time, that is before all the instalments have been paid, is to return the goods … to the
owner under s 15(1) of the Act. The section gives a hirer the right to terminate the agreement.’

In that case, the hirer (Enterpol Travel & Tours Agencies) had entered into a hire purchase
agreement with the owner (the respondent in this appeal) on Feb 25, 1985 in respect of a luxury air-
conditioned coach (the vehicle). The appellant had guaranteed the repayment under a guarantee
agreement bearing the same date. When the hirer defaulted in his instalments, the owner
(respondent) issued a notice on September 28, 1985 to repossess the vehicle. However, unknown to
the respondents, the vehicle had been seized by the customs officials on August 28 on suspicion that
it had been used to smuggle tin or into the country. Upon realising later that repossession was no
longer possible, the owner took a different course of action. It proceeded against both the hire and
the guarantor. At the trial, the respondent obtained judgement against appellant, who subsequently
appealed to the Court of Appeal

In allowing the appeal by the guarantor (appellant), The Court of Appeal said that even if the hirer
had repudiated the hire purchase agreement by refusing to pay the instalment, “that would not
have terminate the agreement”. To put it in another way, it is the owner (respondent) “who could
elect to treat the contract as at an end by accepting the repudiation and terminating the contract.

The appeal by the guarantor was allowed because under the terms of the guarantee, the guarantor
(appellant) could be made liable for the debt of the hirer only upon the following conditions.

(a) The hire purchase agreement had been terminated by the hirer returning the goods (which is
not in the case here)

(b) The owner had given 14 days written notice to the guarantor to buy the goods from the owner
by paying the sum due to the owner (which was not given in the present case).

Under 15(5), which has been inserted by Act A813 in place of existing provisions, it is now provided
that the hirer can require the owner to sell the goods to any person introduced by him who is
prepared to buy the goods for cash at a price agreed to by the owner. Where the “value of the
goods at the time when it is returned to the owner” is more than the “balance outstanding under
the hire purchase agreement”, the hirer is entitled to the difference (this sum is recoverable as a
debt due). Conversely, where the value of the goods returned is less than the balance outstanding,
the owner is entitled to recover the difference.

The expression “value of goods at the time it is returned to the owner” is defined in s 15 (6) (b), a
new provisions inserted by Act A813. This means either-

(a) The best price which could reasonably be obtained by the owner; or

(b) If the hirer had introduced a person who had bought the goods for cash, the amount paid by
that person.

The expression “balance outstanding under the hire purchase agreement” is defined in s 15(6) (a), a
new provision inserted by Act A813. This means the total sum payable by the hirer to complete the
purchase of the goods (together with interest on overdue instalments) less-

(a) The amount paid by or on behalf of the hirer excluding deposit;

(b) Statutory rebate for terms charges; and

(c) Statutory rebate for insurance, if any;

CONCLUSION

Section 2 of the Hire Purchase Act 1967 defines a hire purchase agreement is included allowing the
goods in instalments (whether the agreement stated instalments as rent or otherwise) but does not
include any agreement in which the property in the goods contained through the duration of the
agreement or when or at any time prior to the delivery of goods or under any, people renting or
purchasing goods are those which are bound in the trades or agreement to sell the same goods or
description of such goods contained in the agreement.

In the Hire Purchase Act 1967, there are statutory rights for tenants. Sections 9 to 15 of the Hire
Purchase Act 1967 has allocated statutory rights, namely the right information which is all tenants
are entitled to a full statement on the status of payments made under hire purchase agreements,
the right to the distribution payment that give rights to tenants who do not have enough money to
pay all instalments of hire-purchase agreement provided that the tenant shall be entered several
leasing agreement with same owner, the right to move goods where the tenant is required to store
the goods at the place specified in the agreement, the right to assign the goods when ownership
rights and interests of the tenant under a hire purchase agreement may be assigned to another
person with the consent of the owner, the right to deliver the goods by operation of law, which
states that the property rights and interests of a tenant under a hire purchase agreement may be
discharged by operation of law to the representatives of the tenant and if the tenant is a company,
the liquidator can also perform the same rights, early settlement in which the tenant has the right to
terminate the hire-purchase agreement earlier than the period specified in the agreement with the
owner paying the remaining amount payable under the agreement and termination of the
agreement when the tenant is unable to pay instalments under hire purchase agreement, he is
entitled to terminate the hire-purchase agreement . (Unknown, 2015)
BIBLIOGRAPHY

Hire-Purchase Act 1967 (Revised 1978), Law of Malaysia Act 212 Hirer-purchased Act 1967

(January1, 2006):http://www.commonlii.org/my/legis/consol_act/ha19671978215/

(Accessed October 1, 2014).

Hirer Purchase Act. (n.d.). Retrieved November 9, 2014, from Hirer Purchase Act:
http://www.mti.gov.sg/MTIInsights/Documents/app.mti.gov.sg/data/article/23763/doc/Annex%20D
%20-%20Proposed%20Amendments%20to%20HPA.pdf

Lee, M .P, and Ivan, J. D, Business Law: Statutory Right of Hirer. New York: Oxford

University Press, 2009.

Mumtaz Hassan, Khuzaimah Mat Salleh, Zuryati Mohamed Yusoff. (2003). Undang-Undang
Perniagaan Di Malaysia. Malaysia: UUM-COLGIS.

Pheng, L. M, and Ivan J. D. Business Law: Statutory right of hirer’s; to have his right, tittle and
interest passed on by operation law. New York: Oxford University Press, 2009

Salleh Buang , Malaysian Law on Hire Purchase : Termination of Hire Purchase Agreement .

Selangor: Sweet & Maxwell, 2001.

Scribd. (n.d.). Hire Purchase -DBF. Retrieved November 9, 2014, from Scribc:
https://www.scribd.com/doc/87422129/Hire-Purchase-DBF

The Commissioner of Law Revision, M. (2013, March 1). Hire Purchase Act 1967. Retrieved
November 9, 2014, from Law of Malaysia: http://www.agc.gov.my/Akta/Vol.%205/Act%20212.pdf

[1] [2003] 5 MLJ 403 Arab-Malaysian Finance Bhd v Samian Bin Sabin & Anor.

[2] [1979] 1 MLJ 129 Tractor Malaysia Bhd v Kumpulan Pembinaan Malaysia Sdn.Bhd

[3] [1967] 1 MLJ 83 Credit Corp. (M) Bhd v Industrial Finance Corp & others

[4] In Wong Ai Sung v Orix Credit Malaysia Sdn Bhd, [2007] 5 MLJ 39; the High Court held that any
person who did not strictly comply with the provisions of the Hire-Purchase Act 1967 or attempt to
contract out of the strict provisions of section 22 of the HPA 1967 or if the conduct of the parties to
the hire –purchase agreement did not strictly comply with the procedural requirements such as
getting the signatures of the hirer or guarantor in empty forms without filling in the particulars or
not getting it properly attested may be fatal and the instruments may be declared void. For a case on
forged signatures on guarantees, see Mayban Finance Bhd v Otahulu Industries (M) Sdn Bhd & Ors,
[2008] 7 MLJ 616, High Court.

[5] Hire-purchased 1967(revised 1978), Law of Malaysia reprint Act 212 Hire-purchase Act 1967,
http://www.commonlii.org/my/legis/consol_act/ha19671978215/ (accessed October 1, 2014)

[6] Hire-purchased Act 1967(Revised 1978) Law of Malaysia reprint Act 212 Hire-purchase Act 1967,
http://www.commonlii.org/my/legis/consol_act/ha19671978215/ (accessed October 1, 2014)

[7] Section 12(2) Hire Purchase Act

[8] Section 12(3) Hire Purchase Act

[9] (The Commissioner of Law Revision, 2013)

[10] (Hirer Purchase Act)

[11] L. M. Pheng and Ivan J. D, Business Law: Statutory right of hirer’s; to have his right, tittle and
interest passed on by operation law (New York: Oxford University Press, 2009), 372.

[12] (The Commissioner of Law Revision, 2013)

[13] Salleh Buang, Malaysia Law on Hire Purchase: Termination of Hirer Agreement (Petaling Jaya:
Sweet & Maxwell Asia, 2001), 30.
FORMATION AND NATURE OF HIRE PURCHASE AGREEMENT

Before a hire-purchase effected agreement, the Act imposed a number of legal obligations on the
owner and dealer. Section 4 (1) before any hire-purchase agreement is entered into in respect of any
goods—

(a) In a case where negotiations leading to the making of the hire-purchase agreement is carried out
by a dealer, such dealer shall

(i) Serve on the intending hirer a written statement duly completed and signed by him in accordance
with the form set out in Part I of the Second Schedule

(ii) At any time after the service of the written statement referred to in subparagraph (i) but before
the hire purchase agreement is entered into, serve on the intending hirer a written statement duly
completed and signed both by him and the prospective owner in accordance with the form set out in
Part II of the Second Schedule.

PART I OF THE SECOND SCHEDULE

A summary of the hirer financial obligations; and must set out the following;

 Short description of the goods

 New/second hand
 Address the goods will be kept
 Cash price
 Deposit
 Freight charges, if any
 Insurance and registration (motor vehicle)
 Terms charges (rate per annum, total amount of the terms charges)
 Different between cash price and total amount payable
 The instalment payments
DURING AGREEMENT

 Hire-purchase agreement to be in writing

A hire-purchase agreement in respect of any goods specified in the First Schedule shall be in writing -
section 4A (1), if not the agreement be void and owner will be guilty of an offence under this Act.

 HIRE-PURCHASE AGREEMENT TO BE SIGNED

Every hire-purchase agreement shall be signed by or on behalf of all parties to the agreement –
Section 4B (1). No owner, dealer, agent or person acting on behalf of the owner shall require to sign
a hire-purchase agreement unless such hire-purchase agreement, form or document has been duly
completed – Section 4B (2)

Effect if not follow this proviso: the agreement void and guilty of an offence

CONTENTS OF HIRE-PURCHASE AGREEMENT

Every hire-purchase agreement shall

(i) Specify a date on which the hiring shall be considered to have launched;

(ii) Specify the number of instalments to be paid under the agreement by the hirer;

(iii) Specify the amounts of each of these instalments and the person to whom and the place at
which the payments of these instalments are to be made;

(iv) Specify the time for the payment of each of those instalments;

(v) Contain a description of the goods sufficient to identify them;

(vi) Specify the address where the goods under the hire purchase agreement are - section 4C(1) (a)
Where any part of the consideration is or is to be provided otherwise than in cash, shall contain a
description of that part of the consideration – section 4C (1) (b)

Section 4C (1) (c) instructed to set out in a tabular form these particulars:

1. Cash price - the price at which at the time of signing the agreement the hirer might have
purchased the goods for cash
2. Deposit - the amount paid by deposit
3. Freight or delivery charges if any - the amount included in the total amount payable to
cover the expense of delivering the goods to the hirer
4. Vehicle registration fees - any amount included in the total amount payable to cover vehicle
registration fees in respect of the goods
5. Insurance - any amount included in the total amount, payable for insurance in respect of the
goods
6. The total amounts referred to in the (i), (iii), (iv) and (v), less (ii)
7. Terms charges or interests - the amount of any other charges included in the total amount
payable
8. The annual percentage rate for terms charges which shall be calculated in accordance with
the formula set out in the Seventh Schedule of the Hire Purchase Agreement
9. The total of the amounts referred to in (vi) and (vii), described as "the balance originally
payable under the agreement and
10. The total amount payable.

Where a hire purchase agreement does not comply with the above, it shall be void.

 Separate Agreement for every item of goods

There shall be a separate hire-purchase agreement in respect of every item of goods purchased
under this Act – S.4D (1). If not, the agreement is void and the owner shall be guilty of an offence.

AFTER AGREEMENT

Copy of Documents to be served on hirer

Within fourteen days after the making of a hire-purchase agreement, the owner shall serve on the
hirer and the guarantors a copy of the agreement each –S.5 (1) (Ramasamy, 2016)
Hirer rights:

 To receive a copy of the hire purchase (HP) agreement.

 To obtain any information regarding the account.
 To request a statement of outstanding balance (once every 3 months).
 To settle early the full outstanding amount.
 To terminate the agreement at any time.

Hirer responsibilities:

 Read all the fine print in the written agreement.

 Check that the purchase price and HP terms in the agreement are as agreed. Do not sign
blank or incomplete agreement/ forms.
 Ensure that you can afford the instalment payments for the duration of the HP financing and
pay your instalments on time.
 Know your rights and obligations under the HP contract so that you do not commit any
actions leading to a breach.
 Keep all documents pertaining to the HP financing such as agreement, receipts, etc. in a safe
place.
 Not to remove, sell or dispose of the motor vehicle without the consent of your banking
institution.
 Inform your banking institution of any change of address.
 Insure the motor vehicle after the first year and to update your banking institution within 14
days before the current policy expires. (Lawyerment.com, 2014)
The hirer's rights

The hirer usually has the following rights:

 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)
 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
 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
 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:

 to pay the hire installment

 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 installments and, if appropriate,
recompense the owner for any loss in asset value)
 to inform the owner where the goods will be kept.
 A hirer can sell the products if, and only if, he/she has purchased the goods finally or else not
to any other third party.

it is pretty much similar to installment 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
installments or breaches any of the other terms in the agreement. This entitles the owner:
  to forfeit the deposit
 to retain the installments already paid and recover the balance due
 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)
 to claim damages for any loss suffered

Advantages of Hire Purchase Agreements

Like leasing, hire purchase agreements allow companies with inefficient working capital to deploy
assets. It can also be more tax efficient than standard loans because the payments are booked as
expenses—though any savings will be offset by any tax benefits from depreciation.

Businesses that require expensive machinery—such as construction, manufacturing, plant hire,

printing, road freight, transport and engineering—may use hire purchase agreements, as could
startups that have little collateral to establish lines of credit.

A hire purchase agreement can flatter a company's return on capital employed (ROCE) and return on
assets (ROA). This is because the company doesn't need to use as much debt to pay for assets.

Advantage of Hire Purchase

 Rather than one big lump sum, you can spread the purchase cost of high ticket items. These
include items such as cars, where you can pay over a period of 3 to 5 years typically.
 As the hire purchaser, you’ll own the asset after paying the last instalment which can make it
a favourable alternative to a lease.
 You’ll have immediate use of the item once the agreement with the vendor has been signed
off, rather than wait until you have saved enough.
 Hire purchase is a simple way of financing and typically relatively easy to obtain.
 The interest rate on hire purchases is fixed for the duration of the agreement. This is
regardless of any changes the Bank of England make to the base rate.
 When considering hire purchase advantages and disadvantages, one of the bonuses, is that
usually choose from a fixed term and deposit amount which reflects your circumstances and
budget. (Solutions, 2019)
List of the Advantages of Hire Purchase

1. Items can be repossessed if payments are not made.

A hire purchase arrangement is beneficial because it reduces the risk of the provider for the
consumer goods involved. Because the ownership of the item does not officially transfer until all
payments are made, this plan offers protection to the vendor for an unsecured item because it can
be repossessed. If the buyer is unable to make payments, losses can be recouped by acquiring the
item purchased and selling it again.

2. It allows for ownership of newer, better equipment.

When using a hire purchase agreement, it becomes possible to afford better equipment or consumer
goods than if the transaction was to buy the item outright. Although it requires payments from the
buyer, which often can last for years, it gives them the ability to use the item right away. This is
despite the lack of technical ownership. Buyers are still responsible for taxes and other costs
associated with ownership as well, further reducing the risk to the vendor.

3. It spreads out the costs over time.

When purchasing large consumer goods, it is difficult for some businesses or households to come up
with the necessary cash to purchase items outright. Hire purchase allows for the payments to be
spread out over time to make the purchase affordable. Buyers can take confidence in the fact that
they have fixed monthly payments which are guaranteed not to increase. Interest rates are locked in
with a hire purchase at the time of the transaction.

4. There are usually no taxes charged on a hire purchase agreement.

If your country has a value-added tax or something similar that is assigned to transactions, then
leasing an item will result in a tax charge being added onto the buyer’s monthly payments. This issue
goes away when a hire purchase agreement is in force. There will still be a sales tax charge or other
upfront taxes as part of the transaction. The advantage here is that vendors usually permit buyers to
roll the cost of taxation into the overall agreement, reducing long-term add-on costs.

5. Buyers can shop around for better deals.

Buyers can choose which vendor they want to work with when there is a specific purchase that
needs to be made. That allows them to find the best possible price on the items they require.
Financing for the hire purchase may be offered by the vendor. Buyers can also secure their own
financing arrangement with the hire purchase process, giving them even more flexibility in where
they shop. That makes it easier to avoid borrowing or using corporate or personal savings to secure
items that are required.

6. There are ways to reduce the mandatory monthly payment.

If a monthly payment seems too high, even with a down payment being provided, there are still
options available to further lower the cost of the transaction. A balloon payment is the most popular
method to reduce monthly payments. It will require the buyer to make a large one-time payment at
the end of the hire purchase agreement to finalize ownership transfer. If that payment is not made,
then ownership does not transfer and the right to repossess still exists.

7. Down payments are sometimes optional with this type of transaction.

For corporations or households with an excellent credit profile, a down payment may not be
necessary as part of the hire purchase agreement. That means it is possible to take home the items
needed without paying anything to secure the right to do so. The buyer would still be required to
make the structured monthly payments to avoid repossession. Monthly payments with a zero-down
option tend to be much higher as well, so it is usually better to put down some type of down
payment if possible.

8. It can be paid off early in most cases.

Most hire purchase agreements allow the buyer to pay off the contract early if they have the money
to do so. Some agreements may require monthly payments to continue for 12-24 months to ensure
the transaction is profitable for the vendor. This option is a good way to reduce the long-term cost of
the hire purchase transaction when it can be accomplished.

9. There are few restrictions in place for hire purchase agreements.

Using the example of purchasing a car here, vendors will often put mileage stipulations or conditions
on the agreement that must be met. If these conditions are not met, then additional charges
become the responsibility of the buyer at the end of the lease. A hire purchase contract removes
these restrictions, allowing buyers to use the vehicle as their own until it becomes their own when
they make the last payment on it.

(Gaille, 2018)