Hire Purchase – Ownership Transfer & Instalments
Introduction
Hire Purchase (HP) is a method of buying goods on credit. You get the goods now, but become the owner only after paying the last installment.
1. Process
- Down Payment: Buyer pays 20-25% upfront.
- Delivery: Buyer gets possession.
- Installments: Buyer pays monthly HP installments (Principal + Interest).
- Ownership: Transfers automatically on payment of last installment.
2. Default (Repossession)
- If Buyer fails to pay installments, the Owner (Financier) has the legal right to Repossess (seize) the goods.
- Any money paid till then is treated as "Hire Charges" (Rent) and not refunded.
3. HP vs Leasing
| Feature | Leasing | Hire Purchase |
|---|---|---|
| Ownership | Stays with Lessor (Usually) | Transfers to Hirer at end |
| Depreciation | Claimed by Lessor | Claimed by Hirer (User) |
| Nature | Renting | Buying on Credit |
Summary
- Key: Ownership transfers at the end.
- Risk: Repossession on default.
- Tax: Hirer claims Depreciation + Interest deduction.
Quiz Time! 🎯
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