Are you acquiring assets for your home or business? Are you torn between a hire purchase agreement and leasing?

High value assets can be expensive for any business or consumer to pay in cash. In such cases, finding financing options is the best choice. Some business owners settle for loans to purchase assets. However, the high interest rates can be a hinderance. Leasing and hire purchase are thus the ideal choice when you are looking to acquire new assets.

How a Leasing Agreement Works

Leasing involves hiring assets from a dealer for a given duration. The hirer acquires the items from the dealer for use. During the duration of the leasing the items, the hirer pays installments to the dealer. At the end of the hire purchase agreement, the hirer returns the assets to the owner.

How A Hire Purchase Agreement Works

A hire purchase agreement is almost similar to a leasing contract. In this case, you pay a certain amount as the down payment for the asset. After paying the deposit, you acquire the items and you can utilize them. One also makes repayments throughout the hire purchase agreement. At the end of the hire purchase agreement, the hirer acquires the ownership of the assets.

Differences Between Hire Purchase and Leasing

There are key differences between hire purchase and leasing agreements. Here are some of the differences.

1.      Transfer of ownership

The issue of ownership is the biggest difference between leasing and a hire purchase agreement. There is no chance to become the owner in the case of leasing. However, in a hire purchase agreement, one becomes the owner when they complete payments.

2.      Deposit

One doesn’t need to pay a deposit to acquire an asset in a leasing agreement. However, in the case of a hire purchase agreement, you are required to make a down payment before taking the assets. This is usually a fraction of the total cost. The down payment can be as low as between 10% and 20%.

3.      Duration of the agreement

It is possible to have a lease agreement that lasts several years. In the case where you still need the assets, you can choose to extend the lease agreement. This is not the case with a hire purchase agreement. To reduce the total cost of the assets, the buyer reduces the duration of the agreement. Hire purchase agreements usually lasts several months.

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