Mathematics form 3

Financial mathematics: hire purchase

OBJECTIVES

• By the end of the tutorial you must be able to calculate instalments

and deposits.
INTRODUCTION
• Hire purchase is one way of purchasing goods.
• Customers pay instalments with or without a deposit.
• With hire purchase you calculate the deposit if it is there, then the
instalments.
Example 1

• A shop sells beds at $40 000.00. the bed may be bought on hire
purchase with a deposit of $5 800 and the remainder paid in 24
equal installments. Calculate the monthly installments

$40 000 – $5800 = $34 200

Monthly instalment

= $ 1 425
Example 2

• A television set is valued at 400usd. The shop requires a deposit of

60% and the rest be paid in equal installments of 50usd per month
for 4 months
• Calculate the
a) The deposit
b) Total cost of the television
SOLUTION

a) 240 + (50 x 4)

240 + 200

$440 total cost of the television

WORKSHEET

1. A piece of land is valued at $6 500. the land owner is asking for a

$2 000 deposit and the rest be paid in equal instalments in 15
months. Calculate the monthly instalment

2. A car is priced at $8640 on hire purchase for 12 months with

equal amounts calculate the instalment
continued

3. A radio is sold for $700 cash or $70 per month for a year. Calculate
which method is more expensive and by how much ?

4. A ton of bricks cos $280 cash or equal instalments of $15.50 for 20

months. Calculate which method is cheaper and by how much ?
Answers

1. $300

2. $720

3. Hire purchase by $140

4. Cash by $30
Conclusion

• Hire purchase can be for the whole amount or a deposit is paid then

the remainder be paid in instalments