Did you just come across a hire purchase deal? Are you wondering whether hire purchase is a viable way to purchase assets?

When you are a first-time buyer, hire purchase can be confusing. One must learn the pros and cons of this financing method before opting to sign an agreement. Here’s a guide to help you make the right choice.

What Is Hire Purchase?

Hire purchase is a financing arrangement where a buyer gets the chance to acquire costly assets such as vehicles, electronics, appliances, and furniture without paying the total cost upfront. As a buyer, to buy items on hire purchase, you only pay a fraction of the total cost as deposit and split the balance into installments. The installments are paid over a fixed period. During the period when one makes the payments, they have the right to possess the item and use it. However, you only become the legal owner after the final payment is made.

Benefits Of a Hire Purchase Agreement

There are numerous advantages of choosing a hire purchase agreement when purchasing assets. Here are some of these benefits.

1.      Budget-friendly

Hire purchase provides you the opportunity to spread the cost of assets over time. This not only makes the assets affordable, but it also allows you to work within your budget.

2.      Quick access to assets

In the case of a cash purchase, a buyer waits until they save enough to acquire assets. However, with a hire purchase, you acquire items immediately for your use and pay for them later.

3.      Ownership at the end of the hire purchase agreement

When one completes payments for the items they require, legal ownership is transferred to them. This provides you the freedom to use the items, sell or even trade them.

Cons Of A Hire Purchase Agreement

There are some disadvantages of hire purchase. It is also vital to consider them before opting to sign an agreement.

1)     Total cost is higher than a cash purchase

The final cost of an asset at the end of a hire purchase deal is higher in comparison to the cash price. The difference is brought about by interest charged on the installments. However, the benefits of spreading the cost overshadow the fact that the total cost is higher.

Kenya Credit Traders remains the best hire purchase dealer for household appliances and electronics. Visit our website here.