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    Hire Purchase & Leasing

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    Hari Sankar
    Hire purchase and leasing are financing arrangements where goods are obtained without upfront payment. [1] Under hire purchase, ownership remains with the seller until final payment but possession transfers immediately to the buyer. [2] Leasing allows use of an asset through rental payments without requiring purchase; the lessee gains use of the asset while ownership remains with the lessor. [3] Both provide alternatives to purchasing goods with cash.

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    Hire Purchase & Leasing

    Uploaded by

    Hari Sankar
    51 views15 pages
    Hire purchase and leasing are financing arrangements where goods are obtained without upfront payment. [1] Under hire purchase, ownership remains with the seller until final payment but possession transfers immediately to the buyer. [2] Leasing allows use of an asset through rental payments without requiring purchase; the lessee gains use of the asset while ownership remains with the lessor. [3] Both provide alternatives to purchasing goods with cash.

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    Hire Purchase

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    Hire purchase and leasing are financing arrangements where goods are obtained without upfront payment. [1] Under hire purchase, ownership remains with the seller until final payment but possession transfers immediately to the buyer. [2] Leasing allows use of an asset through rental payments without requiring purchase; the lessee gains use of the asset while ownership remains with the lessor. [3] Both provide alternatives to purchasing goods with cash.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    51 views15 pages

    Hire Purchase & Leasing

    Uploaded by

    Hari Sankar
    Hire purchase and leasing are financing arrangements where goods are obtained without upfront payment. [1] Under hire purchase, ownership remains with the seller until final payment but possession transfers immediately to the buyer. [2] Leasing allows use of an asset through rental payments without requiring purchase; the lessee gains use of the asset while ownership remains with the lessor. [3] Both provide alternatives to purchasing goods with cash.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 15

    HIRE PURCHASE & LEASING

    HP- Concept
    Goods are bought and sold under the following
    terms:
     Payment of periodic installments
     Immediate possession by buyer
     Ownership rest with seller
     Ownership is transferred only after the payment of last
    installment
     Repossession of goods in case of default
     Installment treated as hire charge.
    Definition
    According to Hire Purchase Act 1972
    “an agreement under which goods are let on hire and
    under which the hirer has an option to purchase them in
    accordance with the terms of the agreement, and includes an
    agreement under which:
    • Possession of goods is delivered by the owner thereof to a person
    on the condition that such person pays the agreed amount in
    periodic payments.
    • The property of goods is to pass to such a person on the payment
    of the last of such installment.
    • Such a person has a right to terminate the agreement any time
    before the property so passes.”
    Features
    • Payment made by hirer to hiree (vendor)
    • Possession is transferred immediately to buyer
    • Ownership remains with the vendor till last
    installment is paid
    • Repossession of goods in case of default and
    can treat amount received as hire charge.
    • Installments include interest and principal
    • Usually hiree charges interest on flat rate
    Rights of hirer
    • Right of protection
    • Right of notice
    • Right of repossession
     Where hire purchase price is less than 15000, one half of the price has
    been paid
     Where hire purchase price is not less than 15000, three fourth of hire
    purchase price has been paid
     In case of motor vehicles
    One half, where hire purchase price is less than 5000
    Three fourth, where hire purchase price is not less than 5000 but less
    than 15000
    Three fourth or such higher proportion not exceeding nine tenth where
    hire purchase price is not less than 15000
    Contd..
    • Right of statement
    • Right to excess amount
    Advantages
    • No immediate cash
    • Easy possession
    • Economic growth
    • Thrift
    • Relief to buyer
    Disadvantages
    • Available only to reputed buyers
    • Indiscriminate/ liberal purchases leads to bankruptcy
    • Buyer has to mortgage future income
    • Danger of buyer losing property during depression, as
    value of property diminishes
    • Danger of buyer having to lose even the paid
    installments in the event of default
    • Loss to seller in the event of default by buyer, which
    may result in seller having to re-possess an article
    which may not fetch much market value
    Leasing
    • An arrangement which provides the firm with
    the use and control of assets without buying
    and owning the same.
    • A contract between lessor (owner) and lessee
    (user).
    • Lease rent has to be paid
    Definition
    According to Institute of Chartered Accountants of India, “a
    lease is an agreement whereby lessor conveys to lessee, in
    return for rent, the right to use an asset for an agreed period
    of time. Lessor is a person who conveys to another person
    (lessee) the right to use an asset in consideration of a
    payment of periodical rental under a lease agreement.
    Lessee is a person who obtains from the lessor, the right to
    use the asset for a periodical rental payment for an agreed
    period of time.”
    Financing arrangement that provides a firm with the advantage
    of using an asset without owning it is termed as leasing.
    Features
    • Parties
    Lessor – who conveys to another person (lessee) the right
    to use the asset in consideration of lease rental
    Lessee- person who obtains the right to use the asset
    from lessor for periodical rental
    • Asset
    Property to be leased out
    Fixed assets of high value
    E g: automobile, aircraft, building, Plant & machinery
    Ownership is separated from use
    Contd..
    • Term
     Term of lease is lease period
     Period for which lease agreement is in operation
     Primary & secondary lease period
     Primary lease period- period during which lessor wants to get
    back investment together with interest
     Secondary lease period- only nominal rentals are charged to
    keep lease agreement operational
    • Lease rentals
    Consideration payable by lessee as specified in lease
    transaction
    Types of lease
    • Financial lease
    – A lease under which the present value of minimum lease
    payments at the inception of lease exceeds or is equal to
    substantially the whole of the fair value of leased asset.
    – Non cancellable
    – Lessee is responsible for the leased asset
    – Full payout lease & true lease
    • Operating lease
    • Conveyance- type lease
    • Leveraged lease
    Contd…
    • Sale & leaseback
    • Partial pay out lease
    • Consumer leasing
    • Balloon leasing
    • Close end leasing
    • Open end leasing
    • Swap leasing
    • Wrap leasing
    Contd…
    • Import leasing
    • Cross border leasing
    • Double-dip leasing
    • Triple-dip leasing
    • Japanese cross border leasing
    • International leasing

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