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usually agree to pay for goods in parts or a percentage at a time. It was developed in the United Kingdom and can now be found in Australia, China, India, Jamaica, Japan, Malaysia, New Zealand, and South Africa. It is also called closed-end leasing. In cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a deposit, a hire-purchase contract allows the buyer to hire the goods for a monthly rent. When a sum equal to the original full price plus interest has been paid in equal installments, the buyer may then exercise an option to buy the goods at a predetermined price (usually a nominal sum) or return the goods to the owner. In Canada and the United States, a hire purchase is termed an installment plan; other analogous practices are described as closedend leasing or rent to own.
If the buyer defaults in paying the installments, the owner may repossess the goods, a vendor protection not available with unsecured-consumer-credit systems. HP is frequently advantageous to consumers because it spreads the cost of expensive items over an extended time period. Business consumers may find the different balance sheet and taxation treatment of hire-purchased goods beneficial to their taxable income. The need for HP is reduced when consumers have collateral or other forms of credit readily available. Standard provisions To be valid, HP agreements must be in writing and signed by both parties. They must clearly set out the following information in a print that all can read without effort: 1. 2. 3. 4. 5. a clear description of the goods the cash price for the goods the HP price, i.e., the total sum that must be paid to hire and then purchase the goods the deposit the monthly installments (most states require that the applicable interest rate is disclosed and regulate the rates and charges that can be applied in HP transactions) and 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 hirer 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 installments 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.
the cash price of the goods, cash price means the price at which goods may be purchased against cash payment. the hire-purchase price, hire purchase price means the total amount which is payable by the hire-purchaser under the agreement. the date on which the hire-purchase agreement will commence. the description of the goods that will be delivered to the hire-purchaser at the commencement of the agreement. the number of instalments to be paid by the hire-purchaser along with the amount of each instalment and the date of payment of each instalment. the down payment if any, the down payment means the amount which is required to be paid by hire-purchaser to the hire vendor at the time of commencement of hirepurchase agreement. the rate interest charged by the hire vendor (optional).
Hire-purchase is a credit purchase. The price under hire-purchase system is paid in instalments. The goods are delivered in the possession of the purchaser at the time of commencement of the agreement. Hire vendor continues to be the owner of the goods till the payment of last instalment. The hire-purchaser has a right to use the goods as a bailer. The hire-purchaser has a right to terminate the agreement at any time in the capacity of a hirer. The hire-purchaser becomes the owner of the goods after the payment of all instalments as per the agreement. If there is a default in the payment of any instalment, the hire vendor will take away the goods from the possession of the purchaser without refunding him any amount.
Hire purchase has several advantages over a personal loan: 1. 2. 3. Hire purchase is cheaper than a (unsecured) personal loan because the ownership of the car is retained by the finance company (ie; it is secured) and if you dont make your monthly payments then they will simply take the vehicle back. Hire purchase is relatively quick as it is offered directly by most dealers and manufacturers and is agreed to more easily than personal loans Deposits are lower than with personal loans
And compared to personal contract purchase (PCP), if the final balloon payment is paid to acquire the car, then a hire purchase agreement would likely have been cheaper overall even considering notably higher monthly payments And compared to personal contract hire, if you intend to own and retain the same car for more than 4 or 5 years, than hire purchase is cheaper over the long term than leasing because there are no further payments once you own it completely
And compared with a personal loan, you are not the owner of the car from day one so you can not modify or export it