Hire Purchase

What is Hire Purchase?

Hire Purchase (HP) is a financial arrangement that allows an individual or a business to acquire an asset by paying for it in installments over an agreed-upon period. It is a type of installment purchasing where the buyer pays for the asset in regular installments, and ownership is transferred to the buyer once the final payment is made. The asset serves as collateral for the agreement, which means that the buyer does not own the asset outright until the last installment is paid.

How does the hire-purchase process typically work?

1. Selection of Asset:
   Select an asset, such as a vehicle or equipment, and agree on the purchase price with the seller.
2. Down Payment:
   The buyer makes an initial down payment, the remaining amount is then paid in installments.
3. Payment Period:
   The buyer and seller agree on the length of the payment period, which can vary depending on the nature of the asset and the terms of the agreement.
4. Installments:
   The buyer pays regular installments over the agreed-upon period. These installments typically include both principal and interest.
5. Ownership Transfer:
   Ownership of the asset is transferred to the buyer once the final installment is paid. Until then, the seller retains ownership.

Hire purchase documentation needed:

• Offer Letter
• Purchase invoice
• Hire Purchase agreement
• Registration card for the asset
• Cover note, Copy of road tax

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