The Different Types Of Hire Purchase

When in the market for expensive assets, one of the best options you can make is choosing a hire purchase payment plan. There are many benefits that one enjoys when they opt for hire purchase.

One such benefit is that you will acquire the asset at just a fraction of the total cost. You are allowed to utilize it before you can make the full payment. At the end of the repayments, one will become the owner of the asset, unlike in the case of a lease agreement.

Forms Of Hire Purchase Agreements

There are two main types of hire purchase payment plans. The main difference occurs in how financing is obtained.

• In the first type, the assets are purchased from the dealer by the financier. Afterward, the financier will negotiate with the customer to come up with the agreement. After the agreement, the customer is allowed to utilize the asset. The financier thus becomes the owner of the items purchased until the hire purchaser pays the last installment. The dealer gets the money from the financier. The financing agent in turn recovers the cost of the asset from the customer. In the case the buyer defaults on payment, the financier has the right to recover the asset.
• In the second form of hire purchase, it is the customer that approaches the dealer for the assets they intend to purchase. They will enter into an agreement with the seller. After one pays the deposit, they have the chance to utilize the items purchased. However, transfer of ownership is completed after payment of the last installment. The vendor has the right to seize the assets or items in the case of non-payment.

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