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Installment Sales
Installment Sales
Installment sales is a special type of credit arrangement which provides for a down payment
followed by a series of collections over a number of periods. The concept of installment sales as a
form of credit arrangement was first developed in the field of real estate and high-priced durable
goods like automobiles, appliances and industrial equipment.
The risk of loss in installment sales is great because the credit standing of the customer may
change significantly over the long collection period.
However, it also increases the volume of sale because of the relax collection period.
As a measure, property title may be retained by the seller until the customer’s debt is fully
discharged.
1. Conditional Sales Contract – title of the goods is not transferred upon delivery but retained
by the seller until the contract is fully paid for.
2.Trust Deed – title is conveyed to a trustee who gives the title to the buyer only when the final
payment is made.
3.Mortgage – title passes to the buyer upon delivery, but it is subject to a mortgage or lien for the
unpaid portion of the contract.
4.Lease Option Plan – title is retained by the seller, with the buyer receiving the property under
a lease option plan. After the lease payments approximately equal the purchase price, the
buyer has the option of acquiring the title after making the final payment.
Requires down payment to cover for the possible loss of damaged or depreciated property
The periodic installments payments should be higher than the decrease in the market value of the
merchandise in between periodic payment dates.
TRADE INS WITH ADJUSTED SALES PRICE BASED ON OVER ALLOWANCE AND
UNDERALLOWANCE ON TRADE IN.
NANCING SCHEMES- INTEREST BEARING NOTES LONG END METHOD, AND PV METHOD;
NON INTEREST BEARING NOTE.