Hire Purchase Agreements – Reading

Hire purchase is an arrangement for buying expensive consumer goods. When you enter into a hire purchase agreement, the goods are bought on credit; payment is by installment, ownership of the goods remains with the seller until payment has been made in full and does not pass as soon as the goods comes into the possession of the buyer.

A hire-purchase agreement has to include following information: the contracting parties, an object of the sale and delivery terms, a price and payment terms, information about the competent authority to settle the account between the seller and the buyer for the hire purchase, a retention of title (ROT) clause that the seller has the ownership of the object of the sale until the purchase has been fully paid.

It is important to distinguish between hire purchase agreements and leasing contracts. The key difference between them is that you will own your consumer good at the end of a hire purchase agreement. In contrast, when you lease something,  once the contract term is over the lessee usually has a choice of extending the lease, returning the asset, or introducing a buyer for the asset.