How to invest in hire purchase

Hire purchase is financial instrument here a buyer acquires an item of relatively high amount (car, machineries etc) by paying in instalment while differing full ownership until final payment. In Nigeria where access to credit facilities is low with higher interest rate hire purchase seem to be easily accessible options.

Under a hire purchase agreement, the hirer pays an initial deposit and agrees to pay the balance in instalment over a period of time (daily, weekly, monthly, quarterly etc.) A contract or an agreement of hire purchase is usually undertaken by the buyer and seller where the buyer agrees on the mode of payment, amount to be paid, interest rate and period of payment.

Why is hire purchase a smart investment in Nigeria?

  • It creates passive income

    Hire purchase creates a passive sources of income in that the investor does not need to work. All he does is partner with a hire purchase company, invest and sit back while the company does the rest.

    • High ROI

    Hire purchase in Nigeria often gives 30% to 60% ROI within 12–24 months.

    • It is a low risk investment

    Hire purchase offers a low risk investment such that with proper documentation, guarantors, and GPS tracking, risks can be minimized.

    • High demand

    Hire purchase investment is on high demand because transportation and logistics are daily needs in Nigeria. Drivers are always seeking vehicles but can’t afford them upfront.

    How to invest in Hire Purchase?

    Decide the asset to invest in

    The first step in investing in hire purchase is to choose an asset to invest in. Some of the cars you can invest in includes Toyota Corolla, Toyota Camry, Pickup vans, tricycle, motorcycle etc.

    Find a trusted driver

    Having a trusted driver determines the success of your investment. There are several ways to get drivers such as vehicle hire agents or brokers, online platforms or classifieds, referrals from trusted people, transport unions or cooperatives. Drivers to be taken should have driver license, valid ID, verified guarantors, and must not have a criminal record.

    Sign an agreement/contract

    In order to protect your investment, there should be a legal agreement between you and the hirer. Such agreement should contain

    1. Name/address of the hirer

    2. Total amount to be paid

    3. Period of payment

    4. Regular payment amount and schedule

    5. Interest rate

    6. Details of vehicle

    7. Penalty for default

    Install GPS tracking on the vehicle

    GPS tracking helps to protect your vehicle in case of armed robbery, theft, kidnapping or any other crises that may affect your investment.

    Monitor investment

    Monitoring your investment is very import as it helps you keep track of all the activities of the driver. This includes payment and payment mode. You can directly monitor your investment or use third party hire purchase company like Edoproperty.com

    Risk of Hire Purchase

    1. Driver default
    2. Vehicle theft
    3. Poor maintenance
    4. Delayed payment

    Why you should employ a third party

    Third parties in hire purchase investment mediate between the owners and drivers. This will be of benefit if you:

    • Don’t want to deal with drivers directly
    • Want help managing multiple vehicles
    • Prefer a hands-off investment

    Management firms handle everything from finding drivers to tracking payments. To get started visit Edoproperty.com.

    Blogs
    What's New Trending

    Related Blogs