hirepurchase

Hire purchase is a form of installment sale used in many countries. Under a hire purchase agreement, the buyer obtains immediate possession of goods but the seller retains legal ownership until all agreed payments are made. The buyer typically pays a deposit followed by fixed regular installments over an extended period, with finance charges or interest included in the total price. A contract usually states the total amount payable, the payment schedule, the duration, and the conditions for exercising an option to purchase at the end, which may involve a final payment or option fee. Ownership transfers to the buyer after the final payment or upon exercising the option, depending on the contract terms.

In contrast to leasing, where the lessee rents the use of goods and ownership generally remains with the lessor, hire purchase transfers ownership only after full payment. If the buyer defaults, the seller may terminate the agreement and reclaim the goods, subject to applicable consumer protection laws. Some jurisdictions require HP agreements to be in writing, provide rights to cancel within a cooling-off period, and regulate interest rates and charges.

Common uses include consumer durables such as cars, furniture, and appliances. The total cost via hire purchase is usually higher than the cash price because interest and fees are included. Benefits include immediate access to goods without full upfront cash and predictable payments; drawbacks include the higher overall cost and the risk of losing the goods if payments stop. Early settlement can reduce the total cost.