Hire purchase is one of the best financing options a buyer can utilize in modern times. However, like in the case of other financing options, one wants to have a good understanding of hire purchase before choosing it as a financing option. Today we answer the questions about the basics of hire purchase deals.

What is hire purchase?

Hire purchase is a purchase contract where a buyer obtains assets after paying a downpayment to the seller and clears the balance in installments. One hires a fixed asset to utilize and completes payment through periodic payments. At the end of the hire purchase deal, a buyer becomes the owner of the asset.

Basics of hire purchase agreements

·         Downpayment

When one aims at acquiring assets through hire purchase financing, the first step will involve paying a fraction of the total cost of the items. This can be as little as 10% of the value of the items. However, the rate changes from one hire purchase dealer to the other.

·         Acquiring and using the assets

Hire purchase agreements help a buyer to obtain items without paying for them outright. After one pays the deposit and signs the hire purchase agreement, they acquire the assets. In some cases, the hire purchase dealer delivers the assets. After obtaining the assets, one can also utilize them. The installments thus serve as the hiring charge.

·         Installments

After obtaining assets from the hire purchase dealer, one makes periodic payments. These are hiring charges, but they count towards realizing the cost of purchasing the assets. Installments can be daily, weekly, or monthly payments.

·         Ownership of the assets

The buyer obtains the assets immediately after the downpayment but they do not assume ownership. They are considered to be hiring the assets. Until one pays the last installment, they are considered to be hiring the items. Failure to make payments causes the hire purchase dealer to repossess the assets. On paying all the installments, the seller transfers the title to the hirer.

Kenya Credit Traders is your number one hire purchase dealer. Visit our blog page for more insightful articles on hire purchase agreements.