What is Hire Purchase

Hire purchase also known as Instalment plan is financial arrangement for buying expensive goods and services and paying in instalment.  With a hire purchase agreement, the buyer makes a down payment and pays the remaining balance plus interest in instalments usually with the provision that the buyer will become the owner when he completes payment of the stated instalments or when after completing payment, he exercises an “option to purchase” by paying a nominal option fee.

It plans protect a vendor more than some other financing methods because items can be repossessed more easily should the buyer be unable to keep up with the repayments

Car hire purchase is when you buy a car with an agreement to spread payment and interest over a period of time after an initial down payment after the buyer becomes the legal owner of the product. This can also be referred to as rent-to-ow cars.

How hire purchase work?

Choose the item: It could be a car, motorcycle, tricycle (keke), laptop, or other valuable item.

Pay an initial deposit: Usually 20% to 40% of the total price.

Agree on a repayment plan: This includes how long you’ll pay (e.g., 12 or 24 months) and how much you’ll pay each week or month.

Sign an agreement: This contract explains your responsibilities and the terms of the deal.

Start using the item: You can use the car, appliance, or machine immediately, but it’s not yet legally yours.

Get full ownership after final payment: Once you complete all payments, the seller transfers full ownership to you.

What’s in a Hire Purchase Agreement?

A legally enforced hire purchase agreement must contain

  1. Names and addresses of buyers and sellers
  2. Date of agreement
  3. Cost of item
  4. Instalment plan & agreed amount
  5. Deposit amount
  6. Duration of payment
  7. Default plans

Advantages

  1. Hire purchase makes it easier to start using the item immediately, as there is no need to wait till your money is complete.
  2. Flexibility of payment
  3. It enables businesses that need to retain cash but require expensive machinery get them on hire purchase
  4. Hire purchase agreements allow companies with insufficient working capital to obtain assets that they need.

Disadvantages

  1. Hire purchase agreements usually prove to be more expensive in the long run than paying the full cost for an asset at the outset.
  2. Ownership does not transfer till full payments are made.
  3. Hire purchase can make someone to buy goods that are way beyond their means because the payment is spread over a period of time.
  4. If your money situation changes, you’ll still be locked into monthly payments. 

Is hire purchase a good idea?

Yes it is a good idea because it requires little money to deposit and you can spread the payment over a period of time.

How to get a car hire purchase

You can get a deal: 

  • from the dealership selling you the car 
  • from an online broker 
  • through some banks.

To get started:

  1. Visit edoproperty.com
  2. Choose your role
  3. Fill the required details
  4. Reach out in person
  5. Start earning

You may also like see What type of cars for hire purchase?

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