Hire purchase is a common way of acquiring assets in modern times. The many benefits of hire purchase make it one of the best ways to finance assets for business and homeowners. In Kenya, hire purchase is also known as lipa pole pole, lipa later, or lipa mdogo mdogo.
How Hire Purchase Works
Before signing a hire purchase agreement, it is crucial that one understands how this financing option works. Hire purchase contracts allow the buyer to acquire high-value assets at just a fraction of the total cost. Leading dealers in Kenya such as KCT require a down payment that is only 10% of the total cost of the asset. One can acquire and use the assets after making the downpayment. The remaining cost of the asset is paid in the form of installments.
Why settle for hire purchase when purchasing assets
There are plenty of benefits that will motivate you to consider hire purchase when purchasing assets. One of the common reasons for settling for hire purchase is that these contracts allow you to spread the cost. One doesn’t pay for the assets up front and this allows them to distribute the cost over a duration. Another good reason to acquire assets on hire purchase is the low-interest rates charged. Hire purchase contracts come with fixed low-interest rates. This makes it easier for you to manage your finances.
Best Practices for Hire Purchase Agreements
When purchasing assets, one will want to get the best possible deal. Here are some negotiating practices that can help you get the best hire purchase deals.
- As the hirer, one can negotiate with the owners about the duration of the hire purchase contract.
- It is also vital to negotiate the interest rates charged on the installments
- The hirer also requires researching other hire purchase dealers selling similar goods. Comparing agreements with two or more hire purchase dealers helps you ensure you are getting value for your money.
- When making a down payment, you can request a special discount from the owner of the goods.
- The hirer can also ask for an extension of time if they fail to pay an installment on time.
- It is also advisable to ask the owner of the goods to offer technical advice free of cost throughout the tenure of the hire purchase contract.
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