Requirements for Hire Purchase Car in Nigeria

The hire purchase system is one of the most popular ways of owning a car in Nigeria, especially among commercial drivers. Instead of paying the full cost of a car upfront, hirers (drivers or individuals) can take possession of the vehicle and while gradually paying for it in installments.

Investors, on the other hand, provide the capital or vehicle and earn profit from the structured repayment The hirer does not become the owner of the car until final payment is made.

If you are considering going into a hire purchase car agreement in whether as an investor or a hirer you must understand the requirements involved. This article will explore the Requirements for hire purchase, legal frame work, benefits and challenges you may face.

Legal framework for hire purchase

The hire purchase agreement is regulated by the Hire Pursuant Act, 1965. It outlines terms such as written contract, interest rates and repossession of goods.

Pursuant to section 20(1) of the hire Purchase Act, a contract of hire purchase states as follows: The bailment of goods in pursuance of an agreement under which the Bailee may buy the goods or under which the property in the goods will or ma pass the Bailee.

The section also provided a clear definition of what a motor vehicle is: A mechanically propelled vehicle intended for or adapted for use on road or agricultural purposes.

The Hire Purchase Act made provisions as follows:

  • It guarantees the hirer’s complete participation in the transaction’s creation
  • The statute limited the liabilities that would result from the hirer’s termination of the arrangement, but it also gave him the authority to do so.
  • The Acts restrict the power of the owner to possess the goods indiscriminately. He can only gain possession of the goods when the hirer has defaulted in payment or breached the contract.
  • Certain warranties were implied by the Acts.

Items protected by the act includes: Any and all agreements pertaining to cars and other vehicles, hire purchase deal in which the commodities total cost is less than two thousand naira.

Requirements for Hire Purchase Car in Nigeria

1. Personal Identification Documents

As a hirer who seeks to go for hire purchase, you will need valid identification documents such as National ID card (NIN slip or plastic card), Voter’s card, International passport and Driver’s license. These documents help the investor verify your identity and reduce the risk of fraud.

2. Driver’s License

Since most hire purchase cars are used for commercial transportation, you must have a valid driver’s license. This proves that you are legally fit to drive in Nigeria.

3. Guarantors

Most investors or hire purchase companies will demand at least two guarantors who can vouch for you. These guarantors should be credible individuals with stable jobs, businesses, or properties. They may be required to submit documents like utility bills, valid ID, or employment letters. The qualities of these guarantor may be stated b the investor or companies.

4. Initial Deposit

Some hire purchase is not 100% credit-based though some may be 100% credit-base. Hirers are usually required to make an initial deposit, typically between 20% to 40% of the car’s total cost.

5. Proof of Residence

Investors need to know where the hirer lives in case of default. A utility bill (electricity or water bill), tenancy agreement, or community attestation may be required.

6. Hire Purchase Agreement

The legal document outlining the terms and conditions of the arrangement is the most critical requirement. The Hire Purchase Agreement should clearly state:

  • The car’s total value
  • Initial deposit paid
  • Monthly or weekly repayment amount
  • Duration of payment
  • Interest rate
  • Penalties for default
  • Conditions for repossession

Without a properly signed agreement, the hirer risks dispute or unfair treatment. Never take a Hire Purchase without a signed agreement and always read the agreement carefully before signing it.

7. Insurance Cover

To reduce risk, the investor or companies involved in hire purchase should ensure that the car is insured. Comprehensive insurance is highly recommended. This protects both investor and hirer in cases of accidents or theft.

Hire purchase has become a lifeline for many Nigerians who want to own a car for personal or commercial use, as well as for investors seeking a profitable business opportunity.

You can also read What Happens if I Default on Hire Purchase Payment

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