01 HIRE PURCHASE

What is hire purchases?

Hire purchase is a method of buying goods in which payment of purchase price is spread over a specific period of payment of an initial deposit followed by regular installments. 

The deposit is called down payment.

Items that can be bought through hire purchases:

1. Mobile devices
2. Motor vehicles
3. Computers
4. Industrial machinery
5. Equipment
6. Furniture

Advantages of buying through hire purchase:

1. You do not need large amounts of cash to buy an asset
2. The seller is more willing to allow you to make small regular payments as the assets stay in his/her ownership until you have made all the repayments
3. As the repayment amounts are fixed, it is easier to budget or manage your cash flow
4. Higher purchase loans are handy for businesses who are buying assets that do not qualify for fixed assets loans

Disadvantages of buying through hire purchase:

1. You end up paying more for the asset than you would if you paid outright. On top of that, you would have to service the interest on the loan
2. The seller can take back the asset if you fail to make a scheduled repayment. This is true even if you have already paid a substantial amount for the asset

source: http://www.infinitifinancialservicesuk.com