Hire purchase is a financing agreement where goods are leased with the option to purchase them by paying installments. Ownership remains with the creditor until the final installment is paid, at which point it transfers to the buyer. Key features include installment payments treated as hire charges, immediate possession by the buyer, and the buyer's right to terminate before ownership transfers. There are two main types: consumer hire purchase for individuals and industrial hire purchase for businesses. Advantages include accessing newer goods and fixed interest rates, while disadvantages include the loan being secured against the goods and typically higher overall costs.

1. Hire purchase
subject-strategic finance management
Roll no -7346 to 7350

2. INTRODUCTION :-
Concept of hire purchase:
Hire purchase is the mode of financing the price of the goods to be sold
on future date. In a hire purchase transaction, the goods are let on hire,
the purchase price is to be paid in instalments and hirer is allowed an
option to purchase the goods by paying all the instalments. In a hire
purchase transaction the goods are let out on hire by a finance
company to the hirer .The buyer is required to pay an agreed amount in
periodical instalments during a given period. The ownership of the
property remains with creditor and passes on to hirer on the payment of
the last instalment.

3. MEANING AND DEFINITION:
A transaction of finance whereby goods are bought and sold as per the terms and
conditions specified below is known as hire purchase finance.
A. Payment of periodic instalments.
B. Immediate possesion of goods by the buyer
C. Ownership of goods remaining with the vendor until the payment of last
instalment.
D. Vendors right to repossess the goods in the event of default committed by the
buyer.
E. Treatment of cach instalment as hire charge till the payment of last instalment.

4. According to the Hire Purchase Act of 1972:-
The term Hire Purchase can be defined as an agreement under
which goods are let on hire and under which the hirer has an option
to purchase them in accordance with the terms of agreement, and it
includes;
1. Possession of goods is delivered by the owner thereof to a
person on the condition that such person pays the agreed amount in
periodic payments.
2. The property of the goods is to pass such a person on the
payment of last of such instalment.
3. Such a person has a right to terminate the agreement any time
before the property so passes.

5. Features:
• Hire purchase is based on an agreement
in writing.
• The buyer takes possession of the goods
at the time of entering into contract.
• Each instalment is treated as hire charges.
• Ownership transfer from buyer to seller
on the payment of last instalment.
• The purchaser has the right to terminate
the agrecment any time before the
property passes.

6. Types of hire purchase
1. Consumer hire
purchase
2.Industrial hire purchase

7. Advantages :
1.You can access newer higher specification of car
2. The interest rate is fixed
3. Option to pay off the loan early
Disadvantages :
1.The loan is secured against the vehicle
2. It will cost more overall
3. Monthly payments are based on credit rating

8. CONCLUSION :
In a hire purchase transaction the goods are let out on hire by a finance
company to the hirer .The buyer is required to pay an agreedamount in
periodical instalments during a given period. The ownership of the property
remains with creditor and passes on to hirer on the payment of the last
instalment.