Question

why hire purchase price is always more than cash price

Answer 1

Answer:

here is your answer:

Explanation:

The total payment made under hire-purchase system is more than cash price. In fact, this excess of payment over the cash price is interest. It is very essential to calculate interest because the amount paid for interest is charged to revenue and the asset is capitalized at cash price.

Answer 2

Answer:

It is because interest is included in the hire purchase system.

Explanation:

Firstly, the hire purchase price is always more than the cash price as the interest  is included along with the cash price.

Secondly, the vendor is responsible for the maintenance of the goods.

Thirdly, the risk is also borne by the vendor itself.

Finally, the buyer has the right to return the good back to the vendor if the good is not according to the hire purchase agreement.

The above reasons contribute to the increase in hire purchase price than the cash price.