Hire purchase is quickly becoming one of the best ways to pay for assets in Kenya. The current state of the Kenyan economy has forced people to consider their options when in the market for a variety of items. High taxation, high inflation, collapse of businesses, and political instability has not only affected employed persons, but the effect is felt across all sectors.
In the past, most people have only considered cash payments when acquiring assets. One would save money and after having enough amount purchase the asset that they require. However, one is likely to use almost all their income to cater for their expenses and essential purchase, thus making it hard to acquire assets that need a high amount of money. This is part of the reasons most buyers are settling for hire purchase agreements. Keep reading as we discuss pros and cons of hire purchase agreements.
Benefits of hire purchase
· Spread the cost
With hire purchase agreements, one has a chance to spread the cost of the asset over a given duration. With cash payments, you will need to pay the full amount before acquiring the assets. On the other hand, hire purchase allows to make payments in installments thus allowing you to budget appropriately and spread the cost depending on your income.
· Fixed interest rates
When one opts to purchase assets through cash payments, they might opt for a loan to acquire the cash. The downside of the loans is that they are regulated by The Central Bank of Kenya. Changes in the regulations might cause an increase in the interest rates, thus increasing the total payments of the assets. Hire purchase agreements come with fixed interest rates. With the uncertainty in the current Kenyan economy, fixed interest rates ensure that you can plan ahead and make timely payments for the assets.
· Own the asset at the end of the hire purchase agreement
Hire purchase allows you to acquire an asset immediately after making the down payment. However, one becomes the owner after they complete payments by paying all the installments.
Disadvantages Of Hire Purchase Agreements
· The total cost is higher than cash payments
One of the downsides of hire purchase agreements is that the total cost is usually higher than in the case of cash payments. The increase in the total purchase price is as a result of the interest rate charged on the installments.