Hire Purchase Agreement
Candlefocus EditorThe customer will usually then have full rights to the goods, however this varies from retailer as some will not transfer ownership until all payments are complete and the other are more flexible with their agreements. They are also commonly referred to as installment purchases and when someone is taking out a loan for a car, it is often called hire-purchase because the customer does not own it until the loan is paid in full.
A hire purchase agreement is a type of installment loan, however it is not usually regarded as a form of credit. This is because it is the purchaser’s responsibility to pay the agreement, not the lending company.
For consumers looking to purchase goods, hire purchase agreements can be a good choice if they lack the funds to pay for the item upfront. However, it can also be found to be more expensive in the long run. This is because the consumer will be paying for more than the actual cost of the goods - the interest charged by the retailer for the loan. The consumer should also be aware of any extra charges that are levied such as admin fees, as well as what the terms of the agreement are if payments are missed.
It is important to note that hire purchase agreements are not the same as leasing or renting, as ownership is transferred to the consumer at the end of the payment period. However, with any form of financing, customers should weigh up the long term cost implications and the amount of time it will take to make the payments before deciding which is the most appropriate finance option for them.