Hire purchase remains one of the best financing methods in the Kenyan market. Consumers as well as businesses can benefit from hire purchase when acquiring high-ticket assets. Furniture, cars, electronics, appliances, and machinery are some of the common assets you can acquire on hire purchase terms.

It is vital to consider effort and time finding the right hire purchase agreement before committing to a deal. Just like in any financial decision, it is desirable to check a variety of aspects to get the best out of a hire purchase deal. Here are the key considerations.

Considerations in a hire purchase agreement

1.      Do you need the asset

Before committing to a hire purchase agreement, one needs to determine whether they actually need the asset. Hire purchase deals can look exciting due to the spread cost. However, one should only invest in items they require.

2.      Is the asset a long term investment?

Hire purchase is not the best option for short-term investments. The total cost of a hire purchase deal is always higher than a cash purchase. In the case of short-term assets, it is advisable to settle for leasing as it will offer you a better deal.

3.      Depreciation

There are assets a consumer or a business purchases with a view to resell them in future. When considering the total cost of the items, it is important to consider whether it will be useful at the end of the hire purchase agreement. This helps you determine whether you can get a better resale value.

4.      Interest rates

The total cost of items in a hire purchase deal is higher than cash purchase as a result of interest charged on the installments. Lower rates mean lower total cost. Compare interest rates from different dealers to ensure you get the best deal.

5.      The total cost of the items

It is advisable to compare total cost of items with the cash price. However, while hire purchase price is higher, it is vital to keep in mind that the cost is spread out, making the payment process easier.

6.      The reputation of the dealer

Before signing the hire purchase agreement, it is vital to ensure the dealer is reliable. Online reviews, comments on their social media pages, and ratings can help you understand whether a given company is reliable.

7.      The repayment terms

Before signing a hire purchase deal, check the repayments terms to ensure they are favorable. Late payments and defaulting can see the dealer repossess the items.

8.      Penalties

It is also vital to check the penalties charged in the case of late or missed payments. These charges only increase the total cost of the items.

9.      Hidden charges

The hirer also needs to check the hire purchase agreement to determine whether there are any hidden charges that can increase the cost of the assets.

10.  Other financing options

When acquiring assets, it is desirable to assess different financing options. Always focus on finding the best deal that offers value for money.

We have plenty of blogs on hire purchase here. Follow Kenya Credit Traders.