HIRE PURCHASE

• In a hire purchase transaction the goods are let out on hire by a hiree to the hire purchase customer (hirer). • Instalment covers the principal amount and the interest cost towards the purchase of an asset for the period the asset is utilized. • The hiree charges interest on a flat basis.

in a manner sufficient to identify them .purchase price of the goods (b) the cash price of the goods (c) the date on which the agreement shall be deemed to have commenced (d) the number of instalments by which the hire.CONTENTS OF HIRE PURCHASE AGREEMENT a) the hire. and (e) the goods to which the agreement relates.purchase price is to be paid.

. to assign both the benefit and the burden of the contract to a third person.THE HIRER'S RIGHTS • Right of the hirer to terminate agreement at any time • Right of hirer to purchase at any time with rebate • With the consent of the owner.

THE HIRER'S OBLIGATIONS • Obligations of hirer to comply with agreement • Obligation of hirer to take care of the goods • Obligation of hirer in respect of use of goods • Obligation of the hirer to give information as to the whereabouts of goods .

• To claim damages for any loss suffered.THE OWNER'S RIGHTS • The owner 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. .

machinery etc. The hirer becomes the owner of the asset/equipment immediately after the last instalment is paid. . Depreciation Duration The lessor is entitled to claim depreciation benefit.DIFFERENCE BETWEEN LEASE AND HIRE PURCHASE PARAMETER Ownership of the Asset LEASE Ownership lies with the lessor and is never transferred. Hirer is entitled to claim depreciation benefit. Lease agreements are done for longer duration and for bigger assets like land. property etc. HIRE PURCHASE Financer is the owner. Hire purchase agreements are done mostly for shorter duration and cheaper assets like hiring a car.

the the complete financing option normally 20 to 25 % margin in which no down payments money is required to be paid are required upfront by the hirer .DIFFERENCE BETWEEN LEASE AND HIRE PURCHASE PARAMETER Repairs and Maintenance LEASE Financial lease: responsibility of the lessee Operating lease: it is the responsibility of the lessor HIRE PURCHASE In hire purchase. the responsibility lies with the hirer. Extent of Finance Lease financing can be called In case of hire purchase.

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