How Long is the Payment Period for Hire Purchase Car?

Thinking about getting a car through hire purchase but unsure how long you’ll be paying for it? You’re not alone. Many Nigerians, especially those in public services (Bolt, Uber), logistics, or private transportation, are turning to hire purchase as a more flexible way to own a car. But a big question still remains How long is the payment period for a hire purchase car?

In this blog post, we’ll explain everything you need to know about hire purchase payment duration, breakdowns of typical monthly costs in naira, and tips on how to raise extra funds to meet your payments.

What is the Payment Period in a Hire Purchase Agreement?

The payment period in a hire purchase agreement refers to the length of time you’re given to pay off the cost of the of an asset (car, machines etc) usually in or weekly monthly installments. You usually start by making a down payment (or initial deposit), then continue with scheduled payments until the total amount is completed. Once completed, full ownership of the asset is transferred to you.

Payment period varies depending on the dealer or financing company, some of the common payment durations include:

  • 12 months (1 year)
  • 15 months
  • 18 months (1.5 years)
  • 24 months (2 years)
  • 36 months (3 years)

Factors that determine the period of payment?

The period of payment can vary from person to person. Different drivers or business owners are offered different payment durations based on:

  • Type and value of car
  • Initial deposit made
  • Monthly income or driving history
  • Creditworthiness or references
  • Use of the car (private vs. commercial)

The cost of hire purchase

The cost of buying a car directly is usually lower than buying through hire purchase though lenders have different hire purchase costs. For example, a car that will cost ₦5,000,000 if you pay in full with cash. Alternatively, the car will cost you ₦6,500,000 if you want to pay in instalments through a hire purchase agreement. This means it will cost you ₦1,500,000 naira to hire the car for a period of time (and eventually to own it), rather than to buy it outright for cash. This additional cash of ₦1,500,000 can be called the interest. Interest rate usually differs depending on period the payment will take and hire purchase contract signed.

Breakdown of Hire Purchase Payment Periods

Let us breakdown the hire purchase payment with the several periods. Assuming a buyer wants to get a car worth ₦5,000,000 (e.g., a used Toyota Corolla or Camry). A ₦1,000,000 can be paid as down payment and ₦4,000,000 balance to be paid in installments. Here’s what his monthly payment might look like

12-Month Payment Plan

  • Deposit: ₦1,000,000
  • Balance: ₦4,000,000
  • Duration: 12 months
  • Monthly Payment: ₦333,333

18-Month Payment Plan

  • Deposit: ₦1,000,000
  • Balance: ₦4,000,000
  • Duration: 18 months
  • Monthly Payment: ₦222,222

You can see from the above examples that the monthly instalment differs, this is due to the duration of payment. The monthly payment can still be split into smaller amount to be paid weekly to suit the individual’s pocket. Splitting the monthly payment of ₦333,333/4 = ₦83,333 and ₦222,222/4 = ₦55,555 respectively. This breakdown will help lessen the burden of payment and help you focus on other things.

The breakdown above does not include interest rate; it is just the actual cost of the car. Interest rate should be determined and agreed upon by you and the buyer.

Extra charges and fees

Hire purchase agreements may also involve additional fees and charges which may include

  • Documentation fees
  • Penalty fees for missed or late payments
  • Completion fee for the transfer of ownership to you
  • Rescheduling charge
  • Other charges – you could be charged for repossession costs or for failure to take reasonable care

What Happens If You Miss Payments?

Most hire purchase agreements in Nigeria come with strict penalties for defaulting:

  • The car can be repossessed; here the owner can repossess the car especially if you have not paid up to a certain percentage.
  • You may lose your deposit and all past payments
  • Legal action may be taken

So always communicate with the dealer if you’re having issues. Some companies may allow temporary extensions or restructuring.

Need a Hire Purchase Deal in Edo State?

If you’re in Benin City or anywhere in Edo State and looking for reliable hire purchase car deals, Worry no more. Click Where Can I Get a Hire Purchase Car in Edo State?

Or reach out directly to our car hire purchase company at Hire purchase car in Edo State.

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