Blogs
What's New Trending
-
- Hire purchase
- (0)
- 02 Mins
Hire purchase is one of the most popular ways to acquire vehicles, appliances, and other high-value items in Nigeria and across the world. Whether you’re a business owner, a private buyer, or an investor in the transport industry, understanding the structure of hire purchase agreements is crucial to making informed financial decisions.
In this blog post, we will break it down in simple terms. We’ll discuss the two major types of hire purchase, how they work, and which type may suit your needs best.
What is Hire Purchase?
A hire purchase is a method of buying goods through an agreement in which the buyer pays in instalments over a period of time. Ownership of the item remains with the seller or financier until the last payment is made. Once the final instalment is paid, the buyer becomes the legal owner of the item.
Hire purchase is commonly used for:
- Cars and motorcycles
- Electronics and appliances
- Industrial machines
- Farming equipment
- Business tools
The Two Types of Hire Purchase
1. Consumer Hire Purchase
In this type of hire purchase, the rented goods are for personal purposes. The buyer does not intend to use these products for business transactions. Consumer hire purchase is the most common type used by individuals. It is specifically designed for private or personal use of the goods. This type of hire purchase is highly regulated to protect the rights of everyday consumers. This types of hire purchase typically involves household items, vehicles, or electronics
2. Industrial or Business Hire Purchase
Industrial or business hire purchase is used by companies or entrepreneurs to acquire equipment, vehicles, or machinery for business operations. A financing institution leases the asset to a company or industry for business purposes. The buyer may hire industrial equipment and purchase the machinery later. It is structured to support capital acquisition for business growth. It usually covers commercial vehicles, factory equipment, etc
Differences Between the Two Types of Hire Purchase
| Consumer hire purchase | Industrial hire purchase |
| It is used to own personal assets | It is used for business or commercial asset. |
| Assets are bought as an individual | Assets are acquired as entities not individually |
| Used to obtain personal assets like cars, home appliances, etc | Used for industrial asset like tractors, trucks etc |
| Has a strong legal protection right | Has a limited consumer protection. |
Factors to consider before Hire Purchase Agreement
Before signing a hire purchase agreement to ask yourself the following question
- Can I afford the monthly payments comfortably?
- What happens if I miss a payment?
- How long will the agreement last?
- When do I gain full ownership?
- Are there any hidden charges or penalties?
Which Type of Hire Purchase should you choose?
Consumer hire purchase and industrial hire purchase offers various flexibility that suit will suit your needs. If you’re buying an item for personal use, a consumer hire purchase is the best option but if you’re running a business and need assets like buses, machines, or delivery bikes, a business hire purchase arrangement will offer better flexibility and possibly tax advantages.