The motorcycle has a marked price of $2,500. The cash price is $2,200 after a 12% discount. Under hire purchase, there is a $500 down payment and 24 monthly installments of $250, for a total hire purchase price of $6,500. The difference between the hire purchase and marked prices is $4,000. The interest charged on the outstanding balance is 200%.

1. HIRE PURCHASEHIRE PURCHASE
By Hector Castellanos
castellanos72.hector@gmail.com

2. The marked price of a motor cycle is $2,500. However, if
the customer pays cash then a 12% is given below the
marked price. If the motorcycle is then bought on hire
purchase then a down payment of $500 and 24 monthly
installments of $250.00 each.
Determine for the motorcycle:
(a)The cash price
(b)The hire purchase price
(c)The difference between the hire purchase price and
the marked price
(d)The percent interest charged on the outstanding
balance

3. Solution:
(a)The cash price of = (100 – x) % of the marked price
the motorcycle
= (100 - 12)% of $2,500
= 88% of $2,500
= x $2,500
= 88 x $25.00
= $2,200
Hence, the cash price of the motorcycle was $2,200

4. (b) The deposit = $500.00
Amount payable = Monthly installments X the number of
months
= $250.00 X 24
= $6,000.00
The Hire Purchase Price = Deposit + Amount payable
For the Motorcycle
=$(500.00 + 6,000.00)
= $6,500.00
Hence, the hire purchase price of the motorcycle was $6,500.00

5. (c) Difference between
Hire purchase and = Hire purchase – marked price
Marked price
= $(6,500 – 2,500)
= $4,000
Hence the difference is $4,000.00

6. (d) Interest charged = $4,000.00
Outstanding Balance = Amount payable – Interest Charged
= $(6,000 - 4,000)
= $2,000
Percentage Interest Interest charge
Charged on the outstanding = Oustanding Balance X 100%
Balance
= $4,000
$2,000 X 100%
= 200%
Hence the percentage interest charged on the outstanding balance was
200%.

7. Conclusion:
Hire purchare is more than cash purchase.