Question

Write short notes on features of Hire Purchase System.

Answer 1

Hire purchase is a method of financing of the fixed asset to be purchased on future date. Under this method of financing, the purchase price is paid in installments. Ownership of the asset is transferred after the payment of the last installment.

Features of Hire Purchase:

The main features of hire purchase finance are:

1. The hire purchaser becomes the owner of the asset after paying the last installment.

Answer 2

Answer:

Hire purchase is a type of agreement where the buyer agrees to pay a portion of the total price (known as a down payment) to the supplier at the time of purchase and the remaining balance is paid in various instalments along with the interest that is charged at a fixed percentage. Hire purchase agreements are typically made between two parties in which one party wants to purchase an expensive asset by paying the amount in various instalments.

Explanation:

• Two parties are involved in a hire purchase agreement: one is the vendor of the asset and the other is the buyer of the asset.
• In a hire purchase agreement, both parties mutually agree to engage in a contract wherein the buyer is required to make the first down payment at the time the asset is delivered and the remaining balance is paid in a defined number of instalments along with interest.
• In this situation, the items are delivered after the initial down payment is completed, but ownership of the asset does not pass to the consumer until all outstanding debts to the seller are paid in full.