A hire purchase agreement, also known as an installment plan, is a type of financing tool that allows individuals or businesses to purchase goods without paying the full price upfront. Instead, the buyer agrees to pay for the item over a set period of time, usually with interest.
In a hire purchase agreement, the buyer is typically required to make a down payment and then continue to make regular payments over a fixed term, which can range from a few months to several years. Once the final payment is made, the buyer becomes the owner of the item.
Common examples of goods that are commonly purchased through hire purchase agreements include cars, furniture, appliances, and electronics. Here are a few examples of how hire purchase agreements work in practice:
Car Purchase – If you want to buy a car but don`t have the cash to pay for it upfront, you could enter into a hire purchase agreement with a car dealership. You would typically make a down payment of around 10-20% of the car`s value and then make regular monthly payments over 3-5 years. Once all payments are made, the car is yours.
Furniture Purchase – Another common use of hire purchase agreements is for purchasing furniture. Let`s say you want to buy a new sofa set for your living room but don`t have the full amount to pay upfront. You could enter into a hire purchase agreement with a furniture store and pay for the set over a set period of time.
Electronics Purchase – Many people also use hire purchase agreements to purchase electronics such as TVs, laptops, and smartphones. For example, you could buy a new MacBook through a hire purchase agreement, making monthly payments over a set period of time.
In conclusion, a hire purchase agreement is a financing tool that allows individuals and businesses to purchase goods without paying the full price upfront. By making regular payments over a fixed term, the buyer can eventually own the item once all payments are made. Examples of goods commonly purchased through hire purchase agreements include cars, furniture, and electronics.