Hire Purchase
Hire Purchase
Hire Purchase
Hire Hire
Vendor Purchaser
FEATURES OF HIRE
PURCHASE
• Hire purchase is an agreement between two
parties called Hire Vendor and Hire Purchaser.
• The hire purchaser becomes the owner of the
asset after paying the last instalment.
• The hire vendor has the right to repossess the
asset in case of difficulties in obtaining the
payments of instalment.
• Payment will be made in instalments.
• The instalments in hire purchase include
interest as well as repayments of principal.
• Usually, the hiree charges interest on flat rate.
PROCESS OF HIRE
PURCHASE
• The Dealer , contracts with finance co. for
financing his purchase deals.
• The customer selects the goods for HP, and dealer
arranges for the complete set of documents.
• Down payment by customer on the completion of
proposal form.
• Dealer sends documents ton finance co. With
request to purchase the goods, and accept the HP
transaction.
• The finance co. Signs the agreement and sends
copy along with EMI details to dealer.
• Dealer delivers the goods to the customer ,
property passes on to the finance co.
• Hirer pays EMIs, and on last payment , the
ownership passes on to him , with loan
completion certificate by the finance co.
ADVANTAGES OF HIRE
PURCHASE
• No immediate cash
• Easy possession
• Economic growth
• Thrift
• Relief to buyer
LIMITATIONS OF HIRE
PURCHASE
• Reputed buyer.
• May lead to bankrupty.
• Buyer has to mortgage his property.
• Buyer may incur loss.
• May lose paid instalments in the event of
default.
• It is expensive.
• Loss to seller in the event of default by the
buyer.
DIFFERENCE
BETWEEN HIRE
PURCHASE AND
INSTALMENT
HIRE INSTALMEN
PURCHASE T
1.MEANING System of System of credit
buying goods by sale in which a
making regular sum of money or
payment until debt is paid
the full price is regularly in
paid. instalment.
2.NATURE It posses the It posses the nature
nature of hiring. of selling.
3.OWNERSHIP Ownership of Ownership is
OF GOOD good remains transferred
with seller immediately
until the full after the first
price is paid. instalment.